From now on, the floor price of individual stocks would be lowered to the post-record date adjusted price if the number of shares increases due to the issuance of stock dividends or right shares, said the securities regulator.
In the 761st commission meeting on Monday, the Bangladesh Securities and Exchange Commission (BSEC) revised its rules regarding the floor price it set in March last year.
"The decision was made for the development of the capital market and to protect investors' rights," the BSEC said in a statement after the meeting presided over by Chairman Professor Shibli Rubayat-Ul-Islam.
The capital market regulator set the floor price 11 months ago to protect the then sinking stock market and investors from further devastation amid the Covid-19 pandemic panic.
Initially, most of the stocks were not getting buyers. But floor price turned into an almost forgotten issue since mid-2020 as the market had strongly bounced back riding on a strong macro economy, low interest rate, and increased confidence in the market regulator.
However, in recent weeks, floor prices returned to the market discussion as soon as some companies came up with declarations for bonus and right shares.
As soon as the number of shares increases, stock prices get adjusted in proportion to the increase in the number of shares.
But the floor price for individual securities was not allowing the post-adjustment price to go below the floor. Some stocks like Brac Bank, National Polymer, and Pragati Life faced the problem and the shares became stuck at the floor price, depriving investors of liquidity – the ease to buy and sell in the market.
Floor price became the talk of the town when multinational cigarette giant British American Tobacco Bangladesh announced two bonus shares against each existing share.
Analysts have been fearing that the company shares might get stuck at floor prices, which was likely to be around 60% higher than the estimated post record date adjusted price. Hence, the company's market capitalisation might get an artificial 60% boost only because of the floor price.
However, the problem has been solved as the floors are lowered to the post-record date adjusted price level.