Amendment a must in book building method

The stakeholders of the stock market have decided not to favour the proposed amendment to the book building method that will include maximum P/E ratio for a company to go public, officials said.

On the other hand, the experts said amendment is a must to increase the share supply in a balanced way so that both the entrepreneurs and investors feel comfort to participate in the market.

The stakeholders’ decision came Saturday at a joint meeting attended by both the bourses, Bangladesh Merchant Bankers’ Association (BMBA) and Bangladesh Association of Publicly Listed Companies (BAPLC).

Their opinion comes after the Securities and Exchange Commission (SEC) placed a recommendation regarding the amendment on book building method at a meeting held March 21 last with the stakeholders.

The stakeholders sought time up to March 27, to give their opinion regarding the recommendation of the SEC and the next meeting is scheduled to be held today (Monday).

The SEC fixes the maximum allowable price-earning (P/E) ratio at 15, the average P/E ratio of preceding three years, for a company willing to go public under the book building method.

With other proposals, the SEC included a suggestion of a review committee to justify and scrutinise the audited balance sheets of the intending companies to go public.

The stakeholders said at the moment they feel no necessity of amending the book building method and favoured to identify the misuses of the method.

At the same time, the stakeholders want to wait until the probe body on recent stock market publishes its report.

Ahasanul Islam, senior vice president of DSE, said they are not in favour of changing the laws of book building method.

“This method is widely practiced all over the world. We can only bring amendment to the method by identifying its misuses,” Mr. Islam told the FE.

“On the other hand, we should await the findings of probe body that will express their opinion on the book building method,” he added.

Professor Salahuddin Ahmed Khan, the former chief executive officer of DhakaStock Exchange (DSE), said “The regulator should bring significant amendment to book building method.”

Source: The financial express, 28 March, 2011

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