Regulator scraps Generation Next's IPO prospectus

Star (November 12, 2010)

Generation Next Fashions Ltd has faced the stockmarket regulator's action for violating securities rules.

The Securities and Exchange Commission scrapped the IPO prospectus of Generation Next on Wednesday, after it found the textile company did not go by the rules in asset valuation.

Generation Next showed the land of its chairman as company property, and presented a higher asset valuation to get higher indicative prices of its shares, according to a SEC probe.

"The commission cannot accept loopholes and so cancelled the initial public offering,” said ATM Tariquzzaman, SEC's executive director.

The indicative price of each Generation Next share had been fixed at Tk 50,

Tk 10 in face value and Tk 40 in premium.

The textile maker had plans to float three crore ordinary shares using the book building method, a modern pricing mechanism for IPO.

In the IPO prospectus Generation Next showed that it has been the owner of a land since 2008. But, the SEC found that the land was a property of the company's chairman, and was registered in the name of Generation Next in October this year.

The issue manager of the IPO, BRAC-EPL Investment Ltd, also presented the fabricated asset valuation to the institutional investors at a road show on October 6. The real picture of the company's asset was not reflected in the road show, which is required by the book building regulations before discovering the share prices of a company.

Apart from asset valuation, it is also a regulatory requirement that one auditor firm will check a company's financial report, while another one will assess the company's asset. But, the same auditor firm audited the Generation Next's both financial report and asset valuation.

Generation Next, an export-oriented composite knit manufacturer, started its journey in 2006. It supplies products to top retailers from the US and Europe, such as Tesco, Primark, Asdac, Carrefour, Wal-Mart, United Colors of Benetton, Matalan and George.

Presently, 22 textile companies are listed on the stockmarket.