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Monday, March 16, 2009

Bourses’ stance makes cos cautious in going public

The recent decision of the Dhaka Stock Exchange to list only those companies that offer shares at less than Tk 10 face value and the Securities and Exchange Commission’s slow process of approving share offers of a multi-national company have prompted some other big companies to be cautious in exploring the share market.
Market analysts say both the SEC and the DSE were enthusiastic to bring in big issues in the share market for bringing balance between demand and supply. The regulator and the operator of the stock market believed the demand for shares was high and the market could absorb some big issues, which would also help stabilise the stock prices.
Grameenphone submitted a prospectus to the SEC, offering Tk 449-crore shares at Tk 1 face value and was expecting a prompt decision, as the SEC on many occasions expressed its intention to attract big issues.
Faruq Ahmad Siddiqi, who retired as the SEC chairman last week, told New Age recently that the commission was working to take a decision on Grameenphone’s initial public offering.
But the SEC is yet to take that decision. Rather, indications are there that the commission would further delay the Grameenphone IPO.
Market insiders say the recent DSE decision has added a new dimension to the Grameenphone IPO issue. The DSE last week decided not to allow listing issues with an offering of share at less than Tk 10 face value. The DSE authorities are going to submit their decision in the form of a proposal to the SEC soon.
The Chittagong Stock Exchange also suggested that the SEC should prefer IPOs of Tk 10 face value or more, a senior official of the CSE said.
‘We made the suggestion to the commission last month while making observations on the proposed IPO of Grameenphone,’ CSE chief executive officer AB Siddique told New Age.
He said the bourse proposed to discourage companies which would offer initial shares under Tk 10 face value. ‘Considering investors’ interest and to avoid market volatility, we decided not to encourage any issue with a face value of Tk 1,’ said the CSE CEO, adding that ‘It’s easy to manipulate shares of low denomination.’
‘We, however, have not taken any decision like the Dhaka Stock Exchange of not listing companies with shares of less than Tk 10 face value,’ AB Siddique added.
Citing the example of Aims 1st Mutual Fund with shares having a face value of Tk 1, he pointed out that retail investors often evaluate a Tk 1 share wrongly.
Aims of Bangladesh managing director Yawer Sayeed, however, said, ‘Face value cannot be held responsible for market manipulation.’ ‘Most of the Z-category shares, which witnessed volatility in share prices in recent weeks, are of Tk 10 face value or more.’
Yawer said, ‘If the listing of Grameenphone is delayed or if it does not happen at all, it will emit a negative signal to the market.’
According to market insiders, if the DSE move gets the SEC nod, it will effectively bar Grameenphone from going public.
The big companies including some multinational ones are now cautiously observing the situation before exploring the share market, they said.

The New Age



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