FE Report (March 15, 2011)
The Securities and Exchange Commission (SEC) has sent to the finance ministry for approval a guideline that, among others, contains the maximum allowable price-earning (P/E) ratio at 15 for a company willing to go public under the book building method, sources said.
The securities regulator has also proposed the formation of a five-member committee to review the balance sheets of the companies that are interested to go public under book building method.
A top official of the SEC said the review committee will work until the government forms the Financial Reporting Council of Bangladesh.
In the revised guideline, the regulator has also proposed a two-month lock-in on the shares of institutional investors who will quote to fix the companies' indicative prices during road shows.
The regulatory move comes after a series of criticisms over the book building method, as some companies allegedly earlier siphoned off money from the stock market through over-pricing.
Before offloading shares, many companies fixed very high indicative prices, which do not match with their fundamentals, following the bullish trend of the market.
In some cases, some auditors helped the company authorities in fixing high indicative prices through window-dressing balance sheets.
As a result, a vast amount of money was allegedly siphoned off from the stock market causing liquidity crisis.
In such a situation, Finance Minister AMA Muhith declared the book building method suspended on January 19.
After this declaration, the further IPO proceeds of Mobil Jamuna Lubricants (MJL) and MI Cement were in trouble. These two companies were also blamed for taking very high premiums, which do not match with their fundamentals.
At last, the regulator took initiatives for the listing of these two companies by imposing a condition on both the companies to buy back their shares from the shareholders if prices of the same go down below the offer prices within six months from the date of their listing.
But in absence of companies' response, the SEC decided Sunday not to allow the listing of the companies beyond the regulatory condition.
However, the SEC decided in principle recently not to allow any companies with over pricing. And the regulator rejected two IPO applications submitted by STS Holdings (Apollo Hospitals) and Rangpur Dairy and Foods to go public under fixed price method.
STS Holdings demanded a premium of Tk 115 for each shares of Tk 10, despite the company's earning per share (EPS) was Tk 1.20 and Tk 0.26 in 2010 and 2009 respectively.
Sources said before going public the company sold placement shares at Tk 70 to Tk 90.
The securities regulator has also proposed the formation of a five-member committee to review the balance sheets of the companies that are interested to go public under book building method.
A top official of the SEC said the review committee will work until the government forms the Financial Reporting Council of Bangladesh.
In the revised guideline, the regulator has also proposed a two-month lock-in on the shares of institutional investors who will quote to fix the companies' indicative prices during road shows.
The regulatory move comes after a series of criticisms over the book building method, as some companies allegedly earlier siphoned off money from the stock market through over-pricing.
Before offloading shares, many companies fixed very high indicative prices, which do not match with their fundamentals, following the bullish trend of the market.
In some cases, some auditors helped the company authorities in fixing high indicative prices through window-dressing balance sheets.
As a result, a vast amount of money was allegedly siphoned off from the stock market causing liquidity crisis.
In such a situation, Finance Minister AMA Muhith declared the book building method suspended on January 19.
After this declaration, the further IPO proceeds of Mobil Jamuna Lubricants (MJL) and MI Cement were in trouble. These two companies were also blamed for taking very high premiums, which do not match with their fundamentals.
At last, the regulator took initiatives for the listing of these two companies by imposing a condition on both the companies to buy back their shares from the shareholders if prices of the same go down below the offer prices within six months from the date of their listing.
But in absence of companies' response, the SEC decided Sunday not to allow the listing of the companies beyond the regulatory condition.
However, the SEC decided in principle recently not to allow any companies with over pricing. And the regulator rejected two IPO applications submitted by STS Holdings (Apollo Hospitals) and Rangpur Dairy and Foods to go public under fixed price method.
STS Holdings demanded a premium of Tk 115 for each shares of Tk 10, despite the company's earning per share (EPS) was Tk 1.20 and Tk 0.26 in 2010 and 2009 respectively.
Sources said before going public the company sold placement shares at Tk 70 to Tk 90.
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