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The Bangladesh Securities and Exchange Commission has moved to allow companies intending to raise capital through initial public offering to keep 15 per cent of IPO shares and sell them to anybody the firms wish before the IPO approval.
The regulator would also reduce the lock-in period of placement shares held by foreign investors to one year from the existing two years.
BSEC commissioner Shaikh Shamsuddin Ahmed told New Age that the commission had finalised the plan and would be published soon.
He said that the regulator had taken the move to bring transparency in the placement business.
Market experts said that the BSEC had been criticised for allowing fundamentally weak companies who had already raised huge capital through issuing placement shares.
The capital market has been badly affected by the placement business as errant placement holders dumped shares on the market whenever they find it fit.
They said that the wicked placement business would have a fine tune amid the BSEC’s new IPO rules.
The new rule could make the placement business worse than it is now as there is some kind of confirmation of listing of the shares on the stock exchange, they said.
If the company is not given IPO approval, the firm would return the money to the share money depositors.
BSEC officials said that the regulator would not allow any company to apply for an IPO if it had raised capital in the immediate two financial years.
Therefore, the commission felt it suitable to allow a company to issue 15 per cent of the planned IPO shares to anyone.
The remaining 85 per cent of the IPO floating shares would be distributed among general and eligible investors through the electronic subscription system on pro rata basis.
For example, if a company wishes to float 10 crore shares through IPO, it can take share money deposit from anybody for issuing 1.5 crore shares before the IPO approval. The shares would be a part of the IPO.
Out of the remaining 8.5 crore shares of the company, 70 per cent would be allotted for general investors, including non-resident Bangladeshi, 10 per cent for mutual funds and 20 per cent for eligible investors.
Dhaka University honorary professor Abu Ahmed said that it would not be a good decision to reserve 15 per cent IPO for the company before IPO approval. He said that the privilege would be misused by the company in various ways.
The company may issue those shares to highly influential people to lobby for the IPO approval or it may provide shares to gamblers for raising share prices to astronomical levels, he said. Besides, the company might issue Tk 10 valued shares at any high price secretly, he said.
Market operators and some issue managers said that the privilege to the issuer company might create anarchy on the primary market. It would bring more fundamentally weak companies to the market and facilitate the wrong people, they said.
