DSE says no to low-cap companies

Dhaka Stock Exchange will not allow the listing of any company with
paid-up capital below Tk 50 crore, an initiative meant to curb
price manipulation about low-cap companies. Besides, a company will
have to go for initial public offering (IPO) with minimum shares
equivalent to 25 percent of its paid-up capital to get approval for
listing on the bourse. Also, the DSE decided against any allocation
for private placement. The DSE authorities took the decisions
yesterday at a meeting, presided over by its President Rakibur
Rahman. "If a company's IPO size is small -- meaning a small number
of shares to trade -- it is easy to manipulate prices from the
beginning of the company's trading," Rahman told The Daily Star
after the meeting. Some investors pack the shares into their
portfolios, creating an artificial crisis in the market -- a practice
that distorts the prices, Rahman said. Earlier, it was seen that the
prices of low-cap companies soared on their debuts, although their
fundamentals did not back up the rise in prices. "If a company's
paid-up capital is larger and thus the IPO size, it will not be easy
to manipulate the share prices anymore," the DSE president said.
Rahman said an end to private placement would ensure more
participation of general investors in an IPO. A private placement,
practiced by new issuer companies currently, is a funding round of
securities that are sold without an IPO, usually to chosen private
investors. DSE's decisions however will have to be approved by the
market regulator, Securities and Exchange Commission.