BSEC brings in revised norms for fixing floor price

The securities regulator has introduced new norms in fixing the floor or minimum prices of stocks of the companies that will issue rights or bonus shares.

“The decision was taken considering the dilution effect after the record date of the corporate declaration by a listed company,” said the Bangladesh Securities and Exchange Commission (BSEC) in a statement on Monday.

“If a listed company issues a bonus or rights share, the new floor price of the share will be adjusted or reference price after the record date,” it said.

However, the BSEC did not clearly say when the revised norms will be effective.

It is commonly known that when a rights issue is offered, the stock price gets diluted and will likely go down as more shares are issued to the market.

The decision came four days after British American Tobacco Bangladesh Company Limited declared a 300% cash dividend and 200% stock dividend for the year ended on December 31, 2020.

Following the introduction of floor price norms in March, many companies such as Pragati Life Insurance, National Polymer, Western Marin, Progressive Life, and BD Building System issued rights or bonus or stock dividend.

In March last year, the regulator set the floor price for all listed companies taking into account the average of the closing prices of immediate preceding five trading days—the move taken by the BSEC for the first time to prevent the freefall of the stock prices due to Covid-19 pandemic.

For the newly-listed companies, the floor prices are their opening prices, it said.

After the introduction of a floor price, the capital market came to a halt as investors were reluctant to buy shares amid the economic uncertainty caused by the pandemic.