Sponsors’ bonus shares to face 3-yr lock-in

Lock-in on placement shares to be raised to 3yrs

Mostafizur Rahman | Published: 00:00, Feb 16,2019 | Updated: 23:43, Feb 15,2019


Dhaka Stock Exchange has decided to propose that Bangladesh Securities and Exchange Commission increase the lock-in period on the trading of placement shares to three years from the current one year.
At a board meeting on Tuesday, the country’s premier bourse also decided to put forward a proposal to bring the trading by sponsors of bonus shares declared by a company in three years of its initial public offering under the purview of the three-year lock-in system.
DSE officials said the bourse made the decisions to protect the interest of general shareholders.
As per the existing rules, shares of sponsor-directors are kept under lock-in for three years from the date of issuance of IPO prospectus of the company concerned to prevent the sponsor-directors from selling any pre-IPO shares of the company instantly at the market, but they can sell bonus shares as a form of dividend income.
The rules prompt some companies to declare bonus dividends to sell shares at the secondary market when the price is high.
DSE officials said that the bourse found that some companies used the rules to the benefit of their sponsor-directors that went against the interest of their general shareholders.
So, DSE thinks that sponsor-directors’ bonus shares should also be kept under lock-in for three years, they said.
Moreover, DSE also found increase of placement shares allotment by companies just before their listing with the stock exchanges.
As per the existing law, placement shareholders cannot sell their holdings before one year after listing of a company with the stock exchanges.
After one year, placement shareholders sell their shares at the stock market that pushes down the company’s share prices on the market and the general shareholders feel the brunt of the price fall.
Therefore, the bourse feels that placement shares should also be kept under lock-in for three years.
Bangladesh Securities and Exchange Commission chairman M Khairul Hossain at a programme on February 12 said that the commission was planning to keep the trading of sponsors’ bonus shares under lock-in so that the company owners could not declare stock dividends to sell shares.
He also said that the one-year lock-in period for placement shares would be increased soon.

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