The eligible investors (EIs) will have to take part in the initial public offering (IPO) bidding through a committee, which will unbiasedly recommend quantity and price of the shares concerned, based on some criteria.
The Bangladesh Securities and Exchange Commission (BSEC) introduced a valuation method for the EIs on Monday to curb the alleged manipulation that took place while recommending share prices under the book building method.
In its directive, the BSEC said the EIs will have to form a bidding recommendation committee, comprising at least two members having relevant knowledge, skill, qualification and experience.
The BSEC mentioned some methods, including net asset method, which must be followed while mentioning quantity and price of the shares of a company, to be listed under book building method.
According to the net asset method, the value of a share should be in accordance with the company's net asset value (excluding fictitious assets, bad debt, preference shareholders' claim and proposed dividend or any dividend payable) divided by the number of ordinary shares.
"The expected rate of earnings would be profit available for ordinary shareholders (simple average of last five years of profit after tax), divided by paid-up ordinary share capital (including share premium), and then multiplied by 100," the BSEC noted.
The bidders must not bid over 1.2 times of the price determined through the method.
"The analysis, recommendation and decision will be kept confidential until completion of the bidding period," according to the BSEC directive.
The EIs must take into consideration all aspects, including financial, technical, managerial, commercial, economic, ownership, governance, etc. of the securities offered and its issuer, and review all documents and prospectus in details.
"The EIs will submit their duly signed valuation reports along with the workings and calculations to the exchange(s), conducting the bidding, within two working days of completion of the bidding period," it added.
