IPO Mechanism in Bangladesh: The Securities and Exchange Commission (Issue of Capital) Rules, 2001 re uires that a compan!

intending to raise capital in "angladesh shall first ma#e an application to the Securities and Exchange Commission for consent$ The traditional procedure re uires that firms file registration statements that %ill include preliminar! prospectus that specif! information a&out the firm, the securities &eing offered for sale, and the expected use of proceeds$ 'n receipt of the application, the Commission shall examine it, and if all the re uirements are fulfilled, it shall accord consent in %riting to the issue of capital in "angladesh, as pra!ed for, %ithin sixt! da!s of receipt of the application$ If the Commission finds that the application does not fulfill all the re uirements, it ma!, %ithin thirt! da!s of receipt of application, direct the applicant to compl! %ith the re uirements %ithin such time as the Commission ma! determine, and on fulfillment of such re uirements the Commission shall accord the consent as pra!ed for %ithin thirt! da!s of such fulfillment$ 'nce the staff declares registration statements effecti(e, firms are free to price and sell securities, and the! t!picall! access the mar#et as soon as possi&le thereafter$ )ollo%ing the sale of securities, the SEC re uires firms to file pricing supplements %ithin t%o da!s of sale to notif! mar#et participants of the exact terms of offerings$ *fter that the issuer should pu&lish an a&stract format of the prospectus in four national dailies$ The rules also specif! the minimum and maximum fees for listing %ith the Stoc# Exchange$ The most significant pro(ision of the rule is that it reinstates the compulsor! dual listing in the mar#et$ It is expected that due to reduction of I+' flotation cost reputed entrepreneurs %ould prefer capital mar#et as a source of financing o(er &an# &orro%ing$ In "angladesh there are mainl! t%o I+' floatation methods$ 'ne is fixed price method another is &oo# &uilding method$

Fixed price Method: In a fixed price method shares are offered for sale at pre, determined price set &! the under%riter on &ehalf of the issuer$ )or o&taining the consent of the regulator! authorit! the issuer appl! to the SEC along %ith some necessar! documents namel! ten copies of prospectus, audited financial statement of issuer etc$ It the offer price is higher than the par (alue -ustification of the premium should &e mentioned in the prospectus %ith reference to the fundamentals such as net asset (alue per share at historical or current cost or earning &ased (alue per share calculated on the &asis of %eighted a(erage of net profit after tax for immediatel! preceding fi(e !ears or pro-ected earnings per share for the next three accounting !ear as per the issuers o%n assessment dul! certified &! the auditor of the issuer. a(erage

mar#et price per share of similar stoc# for the last one !ear immediatel! prior to the offer for common stoc#s$ If the issue is o(ersu&scri&ed then rationing occurs$ Book Building Method: In a &oo# &uilding method, Issuer shall in(ite for interest for indicati(e price offer from the eligi&le institutional in(estors through proper disclosure, presentation, document, seminar, road sho% etc$ In Information /emorandum (I/), the issue manager pro(ides an indicati(e offer price &eing -ustified for premium$ Secondl! Issuer in association %ith issue manager and eligi&le institutional in(estors shall uote a final indicati(e price (arithmetic mean of indication of interests for offer price) in the prospectus and su&mit the same to the Commission$ Rationale for the indicati(e price must &e included in the prospectus i.e. the issuer is re uired to disclose in detail a&out the ualitati(e and uantitati(e factors -ustif!ing the indicati(e price$ The indicati(e price shall &e the &asis for formal price &uilding %ith an up%ard and do%n%ard &and of 200 (t%ent! percent) of indicati(e price %ithin %hich eligi&le institutional in(estors shall &id for the allocated amount of securit!. 1o institutional in(estor shall &e allo%ed to uote for more than 100 (ten percent) of the total securit! offered for sale, su&-ect to maximum of 2 (fi(e) &ids$ The institutional &idders %ill &e allotted securit! on pro,rata &asis at the %eighted a(erage price of the &ids that %ould clear the total num&er of securities &eing issued to them$ 3eneral in(estors, %hich include mutual funds and 1R"s, shall &u! at the cut,off price$