SEC orders changes in DSE direct listing regulations
Friday, 5 June 2009
Kayes M Sohel
The capital market regulator has directed the prime bourse of the country to bring an amendment to the direct listing regulations, under which the market was badly affected by some issues' heavy price fluctuation on their debut days.
The recent bitter experiences regarding the regulations that dismayed the investors have prompted the Securities and Exchange Commission (SEC) to issue the order Thursday.
"The SEC has directed the Dhaka Stock Exchange (DSE) to amend its Direct Listing Regulations 2006 in light of the present experiences," said SEC Executive Director Anwarul Kabir Bhuiyan.
The amendment will help prevent any such price fluctuation in future with ensuring fair prices of forthcoming issues to be enlisted under the regulations, he added.
According to the SEC order, any such company will be required to apply to the stock exchanges with a fee of Tk 10,000 only and simultaneously furnish copies of documents.
The proceeds from sale of shares through the Information Document for Direct Listing will belong to the sponsors or shareholders concerned. The company will not get this money, it adds.
As per the SEC order, the existing shareholders shall offer for sale at least 10 per cent of the shareholdings in a company within 30 trading days from the date of commencing normal trading.
When it comes to allocation or distribution, 10 per cent of the 25 per cent shareholdings shall be allocated or distributed to the eligible institutional bidders following the procedures prescribed for determining price in the book building method, and the balance quantity will be available for general investors through the normal trading system of the stock exchanges.
There shall be a lock-in period of 15 trading days from the debut day for a security issued to the eligible institutional investors in the book building method, the order says.
The existing shareholders including sponsors and directors shall be restricted from buying the company's share until complete disposal of the targeted 25 per cent shareholdings, it adds.
A broker selling shares on behalf of existing shareholders shall disclose through the stock exchanges the total number of shares sold everyday along with the cumulative quantity sold and the quantity of unsold shares until completion of sale of the targeted 25 per cent shareholdings.
The normal trade for general investors will begin two days after complete transfer of the shares allocated to the eligible bidders, according to the order.
The SEC has directed the DSE to bring the changes in the regulations in light of the suggestions of a committee formed on August 27 last year.
Under the existing direct listing regulations, Titas Gas failed to sell any single share of it on debut trading on July 6 last year, drawing sharp criticism from different stakeholders.
The share price of Jamuna Oil surged to Tk 952 against the face value of Tk 10 only on the debut day of the issue on January 9 last but it abruptly dipped below Tk 350 in the subsequent days.
Titas Gas Distribution and Transmission Company, Dhaka Electricity Supply Company (DESCO), Power Grid Company of Bangladesh (PGCB), Jamuna Oil Company, Meghna Petroleum, ACI Formulations and Shinepukur Ceramics have made debut in the country's stock markets under the existing direct listing regulations since June 18, 2006.
On February 23, 2006, the commission approved the direct listing regulations for the bourses to encourage the local and multinational profit-making companies to raise fund from the capital market.
The capital market regulator has directed the prime bourse of the country to bring an amendment to the direct listing regulations, under which the market was badly affected by some issues' heavy price fluctuation on their debut days.
The recent bitter experiences regarding the regulations that dismayed the investors have prompted the Securities and Exchange Commission (SEC) to issue the order Thursday.
"The SEC has directed the Dhaka Stock Exchange (DSE) to amend its Direct Listing Regulations 2006 in light of the present experiences," said SEC Executive Director Anwarul Kabir Bhuiyan.
The amendment will help prevent any such price fluctuation in future with ensuring fair prices of forthcoming issues to be enlisted under the regulations, he added.
According to the SEC order, any such company will be required to apply to the stock exchanges with a fee of Tk 10,000 only and simultaneously furnish copies of documents.
The proceeds from sale of shares through the Information Document for Direct Listing will belong to the sponsors or shareholders concerned. The company will not get this money, it adds.
As per the SEC order, the existing shareholders shall offer for sale at least 10 per cent of the shareholdings in a company within 30 trading days from the date of commencing normal trading.
When it comes to allocation or distribution, 10 per cent of the 25 per cent shareholdings shall be allocated or distributed to the eligible institutional bidders following the procedures prescribed for determining price in the book building method, and the balance quantity will be available for general investors through the normal trading system of the stock exchanges.
There shall be a lock-in period of 15 trading days from the debut day for a security issued to the eligible institutional investors in the book building method, the order says.
The existing shareholders including sponsors and directors shall be restricted from buying the company's share until complete disposal of the targeted 25 per cent shareholdings, it adds.
A broker selling shares on behalf of existing shareholders shall disclose through the stock exchanges the total number of shares sold everyday along with the cumulative quantity sold and the quantity of unsold shares until completion of sale of the targeted 25 per cent shareholdings.
The normal trade for general investors will begin two days after complete transfer of the shares allocated to the eligible bidders, according to the order.
The SEC has directed the DSE to bring the changes in the regulations in light of the suggestions of a committee formed on August 27 last year.
Under the existing direct listing regulations, Titas Gas failed to sell any single share of it on debut trading on July 6 last year, drawing sharp criticism from different stakeholders.
The share price of Jamuna Oil surged to Tk 952 against the face value of Tk 10 only on the debut day of the issue on January 9 last but it abruptly dipped below Tk 350 in the subsequent days.
Titas Gas Distribution and Transmission Company, Dhaka Electricity Supply Company (DESCO), Power Grid Company of Bangladesh (PGCB), Jamuna Oil Company, Meghna Petroleum, ACI Formulations and Shinepukur Ceramics have made debut in the country's stock markets under the existing direct listing regulations since June 18, 2006.
On February 23, 2006, the commission approved the direct listing regulations for the bourses to encourage the local and multinational profit-making companies to raise fund from the capital market.