The Bangladesh Securities and Exchange Commission has initiated a move to revise its recently amended public offer rules to set the minimum share offloading at 10 per cent of the total shares of a company under book building method too.

The commission made the move after it had faced huge criticisms over the offloading of just 0.93 per cent of the total shares by Walton Hi-Tech Industries under the book building method of IPO. It was the lowest even flotation by any company under the method.

The company would get approval for listing soon as the existing rules cannot bar it from listing with a small amount of shares, BSEC officials said.

But, a huge pressure from various intermediaries and investors forced the BSEC to amend the rules again after the rules were amended in September last year.

BSEC officials said that it had been drafting new rules for book building method and no more company would be allowed to offload such a nominal amount of shares.

The BSEC amended for the last time the public issue rules, 2015 in September last year when it made to the rules a number of changes including tightening bidding process and raising size of IPO offer to curb manipulations.

As per the rules, a company intending to raise fund under the book building method must raise at least Tk 75 crore through the public issue.

The rules also introduced the Dutch auction in which eligible investors must be allotted shares at their own bidding price and the price of the offering is set after taking in all bids to determine the highest price at which the total offering can be sold.

But, the rules do not mention the minimum amount of share offloading under the book building method but the rules set the minimum offloading at 10 per cent for raising fund under the fixed price method of IPO.

Walton, which is set to raise Tk 100 crore under the new rules as the first company, has become a beneficiary of the loopholes in the rules.

The cut-off price of each share of Walton has been set at a whopping Tk 315 through bidding of the institutional investors and the shares were set to sell to the general investors at a 10 per cent discount or at Tk 283 a share. Only 0.93 per cent of its total shares could be offered to raise Tk 100 crore, which would be the lowest floatation of shares on the capital market.

The scarcity of free-float shares may create overpricing of the company’s shares and cause such manipulations seen in the case of small capitalised companies, market experts said.

The board of directors of Walton has recently decided to reduce the share prices by 20 per cent instead of 10 per cent for the general investors.

Despite tightening the bidding process with directing eligible investors to give proper reason for their price quote, the EIs bid in a range between Tk 12 a share to Tk 765 a share of Walton, which was very abnormal.

Market experts said that frequent changes in rules and policies could harm credibility and bar good companies from making long-term decisions.

Anomalies occurred mainly with the fund raising through the book building method and placement share issuance, they said.Report:newage