BSEC puts in place guidelines on IPO bidding process

The securities regulator has put in place a framework on IPO bidding process using the book building method for eligible institutional investors, with immediate effect.

The move came following complaints of unfair valuation of IPO pricing in Bangladesh's stock markets.

In a directive, the Bangladesh Securities and Exchange Commission (BSEC) on Monday specified the manner of the bidding process for the eligible investors or EIs.

It said the EIs will have to form a bidding recommendation committee of at least two members having relevant knowledge, skill, qualification, and experience.

“The bidder must not bid exceeding 1.2 times of the fair value determined by net assets method and yield method,” the directive noted.

Based on the recommendation of the committee, it said, the Els must decide on participation in the bidding. The decision of the Els and proceeding of the committee along with workings must be preserved for inspection by the commission or the stock exchanges.

About the fair pricing, the BSEC said while analysing, the Els must take into consideration all aspects including financial, technical, managerial, commercial, economic, ownership, governance, etc. of the securities offered and its issuer and review all documents and prospectus in detail.

The Els need to act fairly, neutrally, honestly and shall be independent in analysis and deciding without any influence, interference, or pressure. They must not disclose any information related to the valuation with the issuer, issue manager, other eligible investors, or any other person. The analysis, recommendation, and decision shall be kept confidential until the completion of the bidding period.

The BSEC came up with the guidelines against the backdrop of most of the companies that listed their stocks through book building methods in the past decade and had experienced a significant fall in post-IPO operating performance.