The Bangladesh Securities and Exchange Commission has asked for explanations from the top five bidders who took part in the initial public offerings of Walton Hi-Tech Industries and Mir Akhter Hossain Limited for aggressive share pricing.
The commission on Thursday issued letters to the institutional investors in this regard.
BSEC officials said that the top five bidders who bid for each share of Walton at Tk 628-765 were asked for explanations in regards with the pricing.
In addition, the top five institutional investors who bid for each share of Mir Akhter Hossain Limited at Tk 80-98 were also asked to provide explanations for their biddings.
BSEC executive director and spokesperson Rezaul Karim told New Age that if the bidders failed to provide satisfactory explanations, the regulator would take action against them.
He said that the regulator may bar the bidders from participating in biddings of the next two or three companies’ IPOs which would be approved for raising capital under the book building method.
Earlier on October 21, the BSEC decided to scrutinise the pricing of shares of companies under the book building method by eligible investors.
The regulator has found abnormal bidding by some eligible investors in recent days.
Walton made its debut on the stock exchanges on September 23.
Due to abnormal bidding, Walton ended up floating 0.93 per cent shares on the market which was enough for the company to raise Tk 100 crore.
Market operators said that general investors had to pay higher prices to get shares of these companies as they are issued shares at 10 per cent discount on cut-off prices set by eligible investors.
The regulator must ensure transparency and justified valuation of shares so that the interest of neither the companies nor the general investors are hurt.
The regulator would check if the investors had complied with the code of conduct set for eligible investors in a directive issued on February 22, 2018.
The BSEC introduced the book building method to ensure justified valuation and determine offer price of securities by eligible investors based on their demands, where all eligible investors are expected to participate in the bidding process and quote prices with their own justifications to enable the process successful, fair and transparent, the directive says.
The eligible investors must exercise due diligence and independent professional judgment, and ensure proper care in order to maintain objectivity, transparency and independence in the decision making for bidding, it said.
The regulator on November 4 approved the IPO of Mir Akhter Hossain Limited, allowing the company to raise Tk 125 crore by issuing 2.07 crore shares at Tk 54-60 each. The price was set through bidding by eligible investors.
Earlier, the BSEC asked the investors who had bid for more than Tk 60 for each Energypac share to explain if they had complied with the regulator’s directives issued in February 2018.
The securities regulator recently barred MTB Securities from participating as an eligible investor in the next three IPOs in the book building method for violating rules in connection with the IPO application process.
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