General investors’ IPO quota raised to 75%

The stock market regulator on Tuesday published a gazette notification,  amending some rules in the interest of general investors and raising quota facility for them to 75 per cent through initial public offerings (IPO).

The IPO quota facility for the general public, including non-resident Bangladeshis, was raised to 75 per cent from the existing 60 per cent under the fixed price method. Under the book building method, it increased to 75 per cent from 50 per cent.

The quota facility of Eligible Investors (EIs), including mutual funds, has been cut to 25 per cent from 50 per cent under the book building method while it was reduced to 25 per cent from 40 per cent under the fixed price method.

A senior official of the Bangladesh Securities and Exchange Commission (BSEC) said it was in the interest of general investors and the betterment of the stock market.

He said many eligible investors do not play any role in the secondary market, but take the benefit of the quota facility kept for them in the IPOs.

Capital market analyst Abu Ahmed welcomed the move. He said earlier the IPO quota for general investors was 90 per cent. But institutional investors increased their quotas by lobbying with the previous commission.

“The general investors are the lifeblood of the capital market. The decision to reduce their IPO quota was not the right one. Investors will be enthusiastic about the new decision that will increase their participation in the market and have a positive impact. Besides, eligible investors should operate fully in the secondary market,” the former Dhaka University economics professor said.

Sayedur Rahman, president of the Bangladesh Merchant Bankers Association (BMBA), told The Business Post that the regulator did it in the interest of the investors. “The initiative will be good for the market,” he said.

Under the new notification, BSEC allows companies getting consent letters for IPOs to sell the highest 15 per cent of their IPO shares to anyone.

According to the latest amendment to the public issue rules, 2015, a 1 per cent share from institutions quota of IPO has to be kept for exchange traded fund (ETF).

Besides, out of 5 per cent quota for mutual funds, the asset manager of any ETF will get a 1 per cent quota and the rest 4 per cent will be distributed among the mutual funds.

BSEC officials said that the IPO quota for the ETF would act as an incentive for institutions.

BSEC published the BSEC (Exchange Traded Fund) Rules, 2016, on June 13, 2017, To diversify the capital market.

According to the gazette, no company is allowed to raise their capital by issuing bonus shares in two years after submitting the IPO application for approval.

According to the notice, a company having paid-up capital of not more than Tk 75 crore, could only offload 30 per cent share in pre-IPO. If the paid-up capital is less than Tk 75 crore, then 20 per cent pre-IPO is allowed, and only 10 per cent is permissible if the paid-up capital is as high as Tk 150 crore.