The stock market regulator has imposed restrictions on the eligible investors who bid 100% higher than their cut-off prices in the last five initial public offerings in the book building method.
The companies in the investor category are Walton Hi-Tech Industries Ltd, Energypac Power Generation Ltd, Mir Akhter Hossain Ltd, Lub rref (Bangladesh) Ltd and Index Agro Industries Limited.
The Bangladesh Securities and Exchange Commission (BSEC) took the decision at a meeting on Thursday.
According to the decision, the eligible investors, who bid 200% above their cut-off prices, will not be able to participate as eligible investors in the next three initial public offerings in the book building method.
On the other hand, those, who bid 150% to 200% above their cut-off prices, will not be able to take part in the next two initial public offerings while those who bid 100% to 150% above their cut-off prices will be away from partaking in the next one initial public offering.
Sources said 43 eligible investors bid 100% higher than their cut-off prices in the last five initial public offerings in the book building method.
The commission noticed an unbelievably huge gap between prices offered by the highest and the lowest bidders.
Sometimes, they do not follow the regulations when it comes to evaluating their company shares, sources said, adding that as a result, their actual cut-off price is not determined, and the recent issues bear the testimony to that.
Besides, general investors are being deprived of actual valuation of the shares of the companies.
Earlier, the commission summoned the top five bidders among the eligible investors to know the analysis method of their bidding.
Every eligible investor took part in the analysis of their financial statements, business policy, future growth, management governance and overall condition of their companies.
As per the regulator's directive, the eligible investors have to form a bidding recommendation committee comprising at least two members having relevant knowledge, skill, qualification and experience.
After a detailed analysis of the value and prospects of the securities, the committee has to recommend the investor to participate in the electronic bidding. It will also mention the bidding quantity and price.
During its analysis, the committee has to take into account all aspects, including financial, technical, managerial, commercial, economic and ownership issues.
Besides, it has to use international securities valuation techniques to make decisions on objective and professional judgments.
The cut-off price of Walton Hi-Tech Industries share had been set at Tk315 through electronic bidding, but the prices of the highest and the lowest bidders were Tk765 and Tk12 respectively.
In addition, the cut-off price of Mir Akhter Hossain's shares were determined at Tk60, but the highest and the lowest bidders were Tk98 and Tk14 respectively.
It is alleged that the eligible investors manipulated bidding prices in connivance with the management.