Under the new Public Issue rules, general investors will no longer receive any discount when purchasing IPO shares through the book-building method. Now, general investors must buy shares at the cut-off price, which is determined based on the demand of eligible investors.
The new rules regarding public issues have already been published in the Gazette. Previously, the BSEC had released the draft rules on its website to gather public opinion.
According to the new regulations, the Issue Manager, in consultation with the issuer, will determine the Indicative Price. This price will be based on valuations provided by investment bankers or investors (EIs) during the roadshow, reflecting their demand.
The determined Indicative Price must be disclosed in the red-herring prospectus and must be supported or justified using at least four valuation methods—two from absolute valuation and two from relative valuation.
Furthermore, the Indicative Price must be supported by valuations from at least 40 investors (EIs). These 40 investors should come from different categories, with at least 10 from each of the following three categories: Portfolio Manager, Stock Dealer, and Asset Manager.
The cut-off price will be determined if the Indicative Price varies by more or less than 25%. This cut-off price will serve as the uniform price, which all investors must use when purchasing IPO shares through the book-building method.
The new rules also allow companies to repay up to 30% of fresh loans, subject to conditions. Companies must submit proper reports for such loans, and repayment of non-performing loans is not allowed.
Additionally, instead of the previous 90-day timeline, companies are now allowed 120 days to submit their financial statements.
The BSEC will conduct IPO proceedings based on recommendations from the stock exchanges. Issuer companies are allowed to appeal to the BSEC if necessary. The stock exchanges will also conduct on-site visits for manufacturing companies and, if required, prepare recommendations through expert teams.
The new rules further state that a company is eligible for a public issue if it has not increased its paid-up capital in cash or other consideration (except bonus shares) within the two years preceding the application.
However, if shares are issued in exchange for valid consideration, and not for intangible assets or intellectual property, as part of any collaborative investment, prior approval from the Commission is required.
Right shares may be issued only to existing shareholders or strategic investors through cash via banking channels, and only up to one year before the application date.
This provision does not apply to companies operating under a Public-Private Partnership (PPP) recognized by the PPP Authority, or to companies where the majority shareholding belongs to the state or foreign investors.
Collaborative Investment refers to any equity investment made in a company registered in Bangladesh through joint ventures, alternative investment funds, or foreign strategic investors.
