SEC to hold worksop on book-building next month
FE Report | Thursday, 10 July 2008
The Securities and Exchange Commission (SEC) will hold a workshop on book-building method next month (August) to finalise its preparation on introducing the system.
"We are hopeful that the market experts will give their valuable suggestions in the workshop which will help us to frame the necessary rules on the system," an SEC source told the FE.
He said the rule on the proposed book-building should be meaningful and participative so that all the stakeholders' opinion could be accommodated.
He said a similar workshop was held February 17 last in the Dhaka Stock Exchange (DSE).
The SEC and the two stock exchanges are working to introduce book-building method to ensure fair price in the initial public offerings (IPOs) for the big entrepreneurs who will go public.
"The present IPO pricing system has some distortions which do not encourage many sponsors to go public, that's why we are working to introduce book-building method," the SEC source said.
The book-building system is a modern method of selling equities when an investment firm seeks bids for a new issue at indicative prices. When the book is complete it offers prices and sells the lot in a single day.
Underwriters buy all the shares to be floated by public limited companies through competitive bidding procedure under the proposed system. Later the underwriters choose some brokers to put up those shares for selling to retail investors.
The issuers in the book-building system get their share prices from the underwriters who will be the highest bidder in the bidding process.
The DSE workshop of February 17 had suggested appointment of independent auditors at the listed companies' boards by SEC, compliance of rules on information dissemination, inter-change facilities in the distribution of shares in the book-building by the institutions, mutual funds, NRBs and general public and mandatory credit rating.
The SEC has already fixed certain initial criteria for the prospective issuers and the brokers to become eligible for participation in the proposed book-building system.
"We are hopeful that the market experts will give their valuable suggestions in the workshop which will help us to frame the necessary rules on the system," an SEC source told the FE.
He said the rule on the proposed book-building should be meaningful and participative so that all the stakeholders' opinion could be accommodated.
He said a similar workshop was held February 17 last in the Dhaka Stock Exchange (DSE).
The SEC and the two stock exchanges are working to introduce book-building method to ensure fair price in the initial public offerings (IPOs) for the big entrepreneurs who will go public.
"The present IPO pricing system has some distortions which do not encourage many sponsors to go public, that's why we are working to introduce book-building method," the SEC source said.
The book-building system is a modern method of selling equities when an investment firm seeks bids for a new issue at indicative prices. When the book is complete it offers prices and sells the lot in a single day.
Underwriters buy all the shares to be floated by public limited companies through competitive bidding procedure under the proposed system. Later the underwriters choose some brokers to put up those shares for selling to retail investors.
The issuers in the book-building system get their share prices from the underwriters who will be the highest bidder in the bidding process.
The DSE workshop of February 17 had suggested appointment of independent auditors at the listed companies' boards by SEC, compliance of rules on information dissemination, inter-change facilities in the distribution of shares in the book-building by the institutions, mutual funds, NRBs and general public and mandatory credit rating.
The SEC has already fixed certain initial criteria for the prospective issuers and the brokers to become eligible for participation in the proposed book-building system.