IPO quota facility for market crash victims extended by a year
Small investors who were affected by the 2010-11 stock market debacle have been enjoying a 20% quota facility for IPOs since March 2012
The government has once again extended the tenure of the initial public offering (IPO) quota facility, by a year, for small investors affected by the 2010-11 capital market crash.
The Financial Institutions Division on Monday sent a letter to the Bangladesh Securities and Exchange Commission (BSEC) in this regard, said sources.
According to a BSEC report on the 2010-11 market crash, at least 960,000 investors were affected by the debacle.
Keep updated, follow The Business Standard's Google news channel
The stock market regulator had earlier proposed extension of the facility until June 30, 2021.
The small investors have been enjoying a 20 percent quota in IPOs since the introduction of the facility in March 2012.
The tenure of the facility has so far been extended for eight times and the latest one expired on June 30, 2020.
The government extended this quota facility 71 days after its tenure had expired.
During this period, two companies have completed their IPO subscriptions where the affected small investors get the quota facility.
The IPO subscription of Express Insurance took place between June 14 and July 2, and that of the Walton Hi-Tech Industries Ltd happened between August 9 and August 16.
However, the regulator mentioned in its prospectus that the 20 percent shares reserved for affected small investors have no legal basis, said sources.
Usually, the stock market coordination and supervision committee recommends the tenure extension, every year, on time. But this year, it made the recommendation only recently.
The committee consists of five members from the Financial Institutions Division, BSEC, the central bank, and the Investment Corporation of Bangladesh (ICB).
On the secondary market, IPO shares are generally traded at higher prices than their issue prices due to an unusual attraction of a section of investors to those scrips in the first few trading sessions.
The quota facility allows the affected investors to make up for some of their losses.
The government announced a special package for capital market investors, including a 20 percent quota facility for IPOs in fiscal year 2012-13 for small investors. It was intended to help them mitigate the losses incurred by the market debacle.
Following this announcement, the government formed a Tk900 crore fund, in July 2013, to prop up the capital market and mitigate the suffering of the affected investors.
Later, the ICB was appointed as the fund manager. The central bank disbursed Tk900 crore in three installments against the fund.
According to the Financial Institutions Division, all the capital market refinancing funds have been disbursed.
