Every initial public offering (IPO) applicant will get primary shares on a pro rata basis as the stock market regulator scrapped the lottery system for general investors in an IPO.
The Bangladesh Securities and Exchange Commission (BSEC) made the decision at a commission meeting held on Thursday presided over by its Chairman Shibli Rubayat-Ul-Islam.
As per the regulatory decision, the IPO applicant should have a minimum secondary market investment on listed securities of Tk 20,000 at the market price for applying for IPO shares.
Besides, the beneficiary owner (BO) account-holder should make IPO application involving at least Tk 10,000 or its multiples, according to the BSEC decision.
Currently, investors offer Tk 5,000 when they subscribe to an IPO in the fixed price method. A lottery is held with winners getting a set number of shares. Those whose names do not come up get the whole of their offer returned to their BO accounts.
BSEC officials said that the system for general investors would be quite similar to the IPO system for eligible investors. The new system would allow all applicants for IPO shares to win at least a portion of shares.
Pro rata basis means assigning an amount to one person according to his/her share/portion of the whole.
This would be calculated by dividing the investment of each applicant by the amount of oversubscription and then multiplying the resulting fraction by the total value of floating shares for the retail investors.
Through the system, subscription by eligible investors and general investors would be done at the same time. The mechanism would reduce the time for IPO subscription.
Recently, the BSEC also held a meeting with Dhaka Stock Exchange, Chittagong Stock Exchange and Central Depository Bangladesh in this regard.
At Thursday's meeting, the securities regulator also decided to give consent to IPO application and publication of IPO prospectus at a time in book-building system instead of the existing twice approval systems. This will come into effect from April 1, 2021.
At Thursday's meeting, the BSEC also imposed restrictions on highest bidders of Walton Hi-Tech Industries, Lub-rref (Bangladesh), Energypac Power Generation, Mir Akhter Hossain and Index Agro Industries for their aggressive pricing.