This is very unusual.
It has been seventy-two hours since eligible investors set the cut-off price through bidding in the Book-building method for Walton Hi-Tech Industries' shares, but investors still don't know the price.
The bidding process in the initial public offering (IPO) of Walton had ended on Thursday evening.
This situation has fueled speculation in the market community over what is going to be the ultimate price, and why is it taking so long to disclose.
The speculation amplified further after a media portal on Sunday afternoon wrote that the securities regulator is likely to cancel the bids if the cut-off price goes above Tk300 for the sake of investors' interest.
Sources hinted that the price is already above Tk400.
Why the delay?
The Dhaka Stock Exchange (DSE) on Thursday explicitly said that according to the amended Public Issue Rules, bidders must deposit the total price they quoted for shares in a designated bank account. Before the transactions are settled in banking channel, relevant bids are not eligible to be counted.
And, that is why the DSE had refrained from calculating the cut-off price of Walton immediately.
However, Kazi Sanaul Hoq, the managing director of DSE told The Business Standard on Sunday evening, "All the pay orders against bids have been settled today (Sunday) and we will publish the cut off price tomorrow (Monday)."
Officials at two institutional bidders told The Business Standard that a pay-order is as good as cash. It is not an acceptable reason to wait until the pay-orders are settled in banking channel.
Cut-off price calculation and publishing could be done instantly because the entire process is completed on an electronic platform, which was providing live updates prior to Walton bidding — the first book building IPO under amended public issue rules.
It is like waiting until tomorrow for the results of an election that was held with electronic voting machines which could announce the results immediately, said one of the institutional bidders.
Officials at both the DSE and the Bangladesh Securities and Exchange Commission (BSEC) confirmed that the regulator verbally instructed the DSE to delay the announcement of the cut-off price.
Cancellation of the bids?
There had been discussions in the BSEC about the potential low floats and risk of overpricing in the primary and secondary shares of Walton.
"But we cannot decide before the bidding process ends," said a top BSEC official while responding to The Business Standard's queries on the probability of bid cancellation or forced reduction of the cut-off price.
"Legally, the BSEC can approve or cancel the bids for the sake of investors and for the market," he added.
"It is the job of institutional investors to determine the cut-off price. It would be unfortunate if a good company like Walton is forced to accept a premium lower than what was offered in the bidding process. Such instances will discourage other high performing companies to prefer capital market listing," said Md Obaydur Rahman, the managing director of AAA Finance and Investments Ltd, the manager to the issue for Walton IPO.
Previously, the BSEC had reduced the price of MJL Bangladesh Ltd's primary shares from the price that institutional investors had agreed to pay.
In the recent past, the regulator had challenged the justification of cut-off price in Bashundhara Paper Mills shares in its IPO, but later it did not reduce the price.
However, if the cut-off price is Tk300, Walton is likely to end up with a 1.1 percent free floating shares, and the ratio will be around 0.8 percent if the price is determined at Tk400.
Experts are criticising the low floating proposition in the Walton IPO, and seeing a risk of overpricing in the bourses.
The local company is the champion in the market for refrigerators, and has a weighted average earnings per share over Tk28, and Tk243 net asset value per share.
Walton Hi-Tech Industries is in the process to raise Tk100 crore in capital through the IPO.
As per book building method rules, eligible institutional investors have submitted their bids to buy primary shares worth Tk50 crore of Walton Hi-Tech Industry.
The price at which the supply of the allocated Tk50 crore worth of shares will be sold to the bidders is called the cut-off price.
Later, the general public will apply for the remaining shares at 10 percent discount.