FE Report (January 20, 2011)
The government has decided to postpone temporarily book building (BB) method for price fixing of shares to protect siphoning off money from the stock market through over-pricing, sources said.
The decision came at a meeting Wednesday at the residence of Finance Minister A M A Muhith.
It was said at the meeting that under BB method many companies are fixing very high price of their shares before offloading in the stock market. As a result, huge amount of money is being siphoned off from the stock market, and liquidity crisis has been created.
"In such a situation, it was proposed to suspend the BB method temporarily, and the finance minister gave his nod," it added.
Another source said the Securities and Exchange Commission (SEC) has decided in principle to suspend BB method following the decision of the meeting. The stock regulator is likely to issue a gazette notification within two or three days regarding the matter.
However, some companies have submitted their IPO proposals to the SEC to go public under BB method.
"These companies can be listed under fixed price method, if they intend to go public. But the companies, which have already completed their subscriptions, have no bar to go public under BB method," an SEC source said.
The SEC issued a guideline on March 9, 2010 to introduce BB method. But the experts criticised high prices of shares, fixed under it. Those who buy shares at the bidding can easily come out of the market by selling shares due to minimum lock-in period imposed on their shares.
The decision came at a meeting Wednesday at the residence of Finance Minister A M A Muhith.
It was said at the meeting that under BB method many companies are fixing very high price of their shares before offloading in the stock market. As a result, huge amount of money is being siphoned off from the stock market, and liquidity crisis has been created.
"In such a situation, it was proposed to suspend the BB method temporarily, and the finance minister gave his nod," it added.
Another source said the Securities and Exchange Commission (SEC) has decided in principle to suspend BB method following the decision of the meeting. The stock regulator is likely to issue a gazette notification within two or three days regarding the matter.
However, some companies have submitted their IPO proposals to the SEC to go public under BB method.
"These companies can be listed under fixed price method, if they intend to go public. But the companies, which have already completed their subscriptions, have no bar to go public under BB method," an SEC source said.
The SEC issued a guideline on March 9, 2010 to introduce BB method. But the experts criticised high prices of shares, fixed under it. Those who buy shares at the bidding can easily come out of the market by selling shares due to minimum lock-in period imposed on their shares.
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