Confusion arises over compliance in new IPO rules

IPO seeking companies, issue managers and the Dhaka Stock Exchange remain puzzled as to how the amended public issue rules will be enforced in case of companies which applied for their initial public offerings before the change.

Some companies and issue managers claimed that the stock market regulator Bangladesh Securities and Exchange Commission officials had earlier told them to comply with the previous rules as they applied for their IPOs before the amendment.

But, DSE officials said that it was against the spirit of laws and regulations to abide by the previous rules when the new rules became effective.

There is nothing in the amended rules where it says that pending IPOs would follow the previous rules and the BSEC did not issue any notification or directive about their claim.

Therefore, the DSE is following the amended public issue rules when assessing the IPO applications (pending or new) as the regulator has not instruct the bourse about any waiver for the pending IPOs.

In January, 2016, the BSEC approved Energypac to raise Tk 41.82 crore through an IPO under the fixed price method of IPO, but the company was later asked to apply again with a revised IPO prospectus as the public issue rules were amended in 2016 before the company went public, DSE officials said.

The company is yet to get the IPO approval.

BSEC spokesperson and executive director Saifur Rahman told New Age that the commission earlier had said in a press release that the companies applied before April 29, 2019 for IPOs would be considered under the previous public issue rules.

But, market experts said that a press release could not be a directive that should be followed.

The commission said in the press release that the companies’ IPOs would be assessed under the previous rules, but the commission is following some of the provision inputs in the amended rules like imposition of minimum investment in listed securities before the intended IPO subscription by eligible investors and sponsor-directors’ share lock-in.

When the DSE management sought explanation from EGeneration Limited about its non-compliance with minimum share offloading rules as per the public issue rules amended in 2019, the company mentioned that a tri-party meeting among the BSEC, issue manager, EGeneration prompted the company to submit prospectus keeping only the amendment to lock-in period in mind.

The DSE also observed that Associated Oxygen Limited applied to raise Tk 15 crore, which is against the new public issue rules. The company said that it applied under the previous rules of public offer.

When the DSE asked Crystal Insurance Company about the utilisation of 80 per cent of the funds through issue of capital and about non-compliance of minimum share offloading, the company replied that they applied for an IPO following the previous rules.

The DSE sent its observations about the three companies’ IPOs to the BSEC, mentioning the inconsistencies as the public offer rules violation. Therefore, the BSEC should clarify the issue through a directive, market intermediaries and analysts said. (Source: New Age)