According to a report published in the Financial Express, the government has decided to sell more than 29.31 million shares from its holding at Dhaka Electric Supply Company (DESCO) at prevailing market price. The DESCO was listed with the stock exchanges in 2006 by offloading 25 shares through direct listing method.
Almost a decade ago the Finance Minister said that shares of state-owned enterprises (SOEs) would he offloaded to bring buoyancy in the share market. Unfortunately the Finance Minister's assurance was not materialised. Not a single share of any SOE has been offloaded. Let us see if the sale of DESCO shares is the beginning of an end or the end of a beginning.
More than a decade ago three state-owned banks viz Sonali Bank, Agrani Bank and Janata Bank were converted to public limited companies having been registered with the Registrar, Joint Stock Companies and Firms under the companies Act, 1994. Earlier two state-owned commercial banks Pubali Bank and Uttara Bank were fully privatised and Rupali Bank was partly privatised. Not a single share of these three banks has been sold to the public. These banks are under the administrative control of the Ministry of Finance. Since the Finance Minister had desired to offload shares of SOEs, mystery remains why these banks did not go public. A public limited company without a single member of the public is like Hamlet without the Prince of Denmark.
The investors should remember that availability of new shares is an opportunity for selecting shares according to one's choice. It has nothing to do with the price hike. Rise of price depends or should depend on other factors. DESCO is a service industry with the motto of providing the highest quality of service to the people. It is not likely to be greedy.
The share market in Bangladesh is a gold mine for initial public offering (IPO). This kind of sale of shares of DESCO may be termed as semi-IPO. So it is hoped that these shares would be sold very smoothly.
In this connection the book building system should be discussed as the interest of the general investors is intrinsically linked up. Book building method means the process by which an issuer attempts to determine the price to offer its securities based on demand from the eligible investors. Eligible investors are as follows: I) merchant bankers and portfolio managers, 2) asset management companies, 3) mutual fund, 4) stock dealers, 5) banks, 6) financial institutions, 7) insurance companies, 8) alternative investment funds/fund managers, 9) foreign investors who have portfolio investments in the capital market of Bangladesh through any securities custodian registered with the Securities and Exchange Commission (SEC), 10) recognized pension funds and any provident funds, 11) any other institution as approved by SEC.
Book building system is universal. This method is applied as a preventive step in case of mega public issue against any possible under subscription by the general investors. In Bangladesh any company desirous of issuing shares at premium shall have to go through the process of book building. Under this system eligible investors (EIs) shall offer premium price through sealed envelopes. The EIs will, as a matter of routine, examine the relevant papers before submitting any offer. Earlier, it was more or less a unilateral affair of the issuer as he used to fix the price. Thus introduction of book building is definitely an investment-friendly decision.
The share market has remained firm and steady. The present rise of price is the consequence of the natural movement of the stock market. Demutualization of the market has ensured good governance. Rules of the games are observed without any interference and hindrance.
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