Business Desk :
The Bangladesh Association of Publicly Listed Companies (BAPLC) has said the new methods to discover primary share prices in book building are conservative and might discourage the listing of good companies.
In a letter to the Bangladesh Securities and Exchange Commission (BSEC) chairman in mid-February, the association requested him to formulate a more market-based approach for pricing primary shares when companies seek premium over face value.
BAPLC also requested the BSEC not to execute the 1 February 2021 directive issued by the latter. The directive included a code of conduct for eligible institutional investors (EIIs) regarding the price they can quote in bidding under the initial public offering (IPO) of the book building method.
In Bangladesh, when a company wants prices higher than the face value of its primary shares, it has to apply for the book building IPO, where EIIs set the reference price and the masses follow that at a 10% discount.
Code of conduct for EIIs and listed companies’ opinions
The Bangladesh IPO market has long been blamed for irresponsible bidding and collaborative attempts to inflate primary share prices. Also, a trend was observed that many companies artificially inflated their pre-IPO financial figures for better prices, which ultimately did not sustain.
Several examples of insane bidding, where the quoted prices by different EIIs varied widely, surprised observers.
In this context, the BSEC on 1 February this year came up with a directive that allowed EIIs to follow only three methods to determine their bid price.
