SEC suggests changes in book building method

Star (March 15, 2011)

 

The stockmarket regulator has recommended some changes in the book building method, which was suspended by the government in January in the wake of huge criticism of the system.

In line with the recommendation, the offer price of a company's share will be no more than 15 PE (price-earnings), or must not exceed five times its net asset value per share, or whichever is lowest, under the book building system.
The PE should be calculated based on the company's previous three years' average earnings per share (EPS) mentioned in the audited accounts.
For example, if a company's face value is Tk 10 and EPS is Tk 5, under the proposed method, its highest offer price would be Tk 75. If the net asset value (NAV) per share is Tk 20, the highest offer price would not cross Tk 100. But, the final offer price should be within Tk 75, as it is the lowest.
The Securities and Exchange Commission (SEC) has sent the draft recommendations to Finance Minister AMA Muhith for consideration.
The SEC also suggested the formation of a committee comprising the Institute of Chartered Accountants of Bangladesh, the Institute of Cost and Management Accountants of Bangladesh, Dhaka Stock Exchange and Chittagong Stock Exchange to scrutinise the audited accounts submitted by the companies before IPO.
The officials of other departments concerned will also represent in the committee. If the committee has any comments or opinions after the scrutiny, those will have to be sent to the commission in seven working days.
The lock-in period for institutional investors has been proposed at 60 days instead of 15 days, while the subscription period at 15 days, down from 25 days.
The SEC also recommended a cut in the institutional bidding period from 72 hours to 48 hours.
After the bidding, the issuer company and the issue manager will have to submit the final IPO prospectus to the SEC within 48 hours.
The printed draft IPO prospectus will have to be sent to related institutions and organisations at least five days before the roadshow.
DSE and CSE officials will be present at the roadshow, and indicative price would be mentioned in the draft prospectus, according to the draft recommendation.