Chittagong Stock Exchange has proposed a number of changes to the book building method of initial public offering outlined in the Bangladesh Securities and Exchange Commission (public issue) rules, 2015.
The port city bourse on April 16 placed the proposals before BSEC for the interest of the capital market, CSE officials said.
The stock exchange proposed that the bidders under book building method must deposit full of the bid amount in advance in the designated bank account maintained by the exchange conducting the bidding.
Currently, the bidders deposit at least 20 per cent of the bid amount.
The exchange recommended introducing a genuine ‘Dutch auction’ price discovery method.
The bidders, who are entitled to get securitires, must be allotted the securities at their respective bid prices as per their intended quantity on highest to lowest bid basis, in a descending order of individual bid price till exhaustion of the total amount offered to eligible investors.
The bindings would thwart unusual or unfair bidding price, the bourse said.
According to the current public issue rules, all the eligible investors participating in the bidding must be offered to subscribe the securities at the cut-off price. It is mandatory for EIs bidding at or above the cut-off price to subscribe up to their intended quantity but optional for EIs bidding below the cut-off price.
To protect interest of the general investors, ordinary shares of the issuer must be subjected to lock-in, from the date of first trading day with the exchanges instead of the date of issuance of prospectus.
The bourse requested to replace ‘road show’ with ‘web show’, an online electronic presentation by an issuer and issue manager to eligible investors about the issuance of securities disclosing all the features.
The issuer must post invitations on the web sites of issuer, issue manager and the exchanges along with the present rule of sending invitations through email and five widely circulated national dailies, CSE recommended.
The process has already been incorporated in the BSEC (Qualified investor offer by small capital companies) rules, 2018.
The bourse also urged the BSEC to change definition of cut-off price. In case of under subscription, the lowest price offered by the bidder must be the cut-off price, it suggested.
The lapses in the IPO book building method surfaced amid the current volatility at the capital market.
Sharp criticisms against approval of fundamentally weak companies’ IPOs sent the regulator on the edge.
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