Backed by the brokers, the investors on the country’s stocks market have demanded of the Securities and Exchange Commission of Pakistan (SECP) to remove what they perceive anomalies in its book building policy if the apex regulator really was not working to make the rich richer.
The equity investors, as analysts said, were presently standing in long queues to satisfy their unprecedented risk-taking appetite for initial and secondary public offerings at least four listed firms are making to raise billions from the booming stocks market, in the wake of monetary easing by the State Bank.
Having raised some Rs 58 billion so far, these capital-hungary companies are eyeing at least Rs 14 billion more through floating part of their shareholdings in selected scrips by end-2014.
The end of this last month, the analysts believe, would see Hascol Petroleum Limited having made primary and secondary offerings worth Rs 1.41 billion, United Bank Limited Rs 38.22 billion, PPL Rs 15.34 billion, EPQL Rs 1.21 billion, Saif Powers Limited Rs 1.44 billion, Allied Bank Rs 13.18 billion, Systems Limited Rs 520 million, Synthetic Products Enterprises Rs 757 million and Sindh Modaraba Rs 135 million on the stocks market.
However, as the process of divestment goes on the equity investors, the stocks brokers claimed, were losing confidence in the book building process the apex regulators at SECP recently carried out for Initial Public Offerings (IPOs) in a number of companies.
“The investors feel that the SECP is not following a consistent policy,” claimed Basharat Ullah Khan, General Secretary of KSE Stockbrokers Association (KSE-SA).
The regulator, he said, had frequently been changing the relevant regulations. “This state of affairs undermines investors’ confidence and gives a poor impression of the book building mechanism,” Khan reminded the commission.
A number of “affected investors”, the broker said, had approached KSE-SA with different demands the fulfilment of which, they believe, would help SECP resolve the perceived “contradictions” in its book building policy.
“There should be no upper cap on the price of the share,” Khan quoted the investors as demanding.
Also, the principle of strike price be adhered to and all applicants be allotted the shares on “pro-rata basis” at that strike price, he added.
Further, the investors demanded the inclusion of small investors in the process through “combined application” if the apex regulator’s objective was not to “make the rich richer”.
When contacted, an SECP spokesman rejected the investors’ “allegations” and “concerns” as baseless.
“There is no inconsistency in the book building policy of SECP,” the spokesman told Pakistan Today.
Till book building for the subscription of shares of Hascol, there was no concept of the price band or cap on the floor price, he said.
The floor price for book building of Hascol was set by the Hascol at Rs 20 per share.
The strike price was determined through the book building at Rs 56.50 per share i.e. 182.5 percent of the floor price.
Some of the investors, the spokesman said, viewed that the strike price determined was “inflated, exaggerated and manipulated”.
While others, he said, suggested that the concept of the price band be introduced.
The SECP “on demand of the market”, the spokesman said, introduced on July 24 the price band which was first implemented in the IPO of Saif Power Limited in September.
The entire shares under the book building portion of the issue were subscribed at the upper limit of the price band, he recalled.
“It is noteworthy to mention here that the SECP has no role in setting of the lower limit of the price band,” said the spokesman.
However, he said, the above-mentioned book building criteria restricted the upper limit.
After the book building of Saif Power, the IPOs of System Limited and Synthetic Products were held through the book building as per SECP’s criteria mentioned above.
“So there is no inconsistency in the SECP’s book building policy,” he insisted.
Further, the spokesman said, the statistics showed that in case of Saif Power, System Limited and Synthetic not only the investors’ participation was encouraging but the base of successful bidders was also diversified.
Number of the total bids received and number of the bids declared successful in the three companies’ offerings stood, respectively, at 406 and 69; 201 and 52 and 66 and 58.
About investors’ concern on upper cap, the spokesperson clarified that under the SECP’s book building criteria the issuer had full liberty to fix the price band.
However, spread in the price band shall not exceed a certain threshold, he said.
“In case an issuer is confident that its shares worth high, it may accordingly set the lower limit of the price band high,” he said.
In case the upper limit on the price band or cap was removed then “we may face same situation and complaints” as faced in the book building of Hascol Petroleum.
As regard to the Association’s proposal regarding allocation of shares on pro-rata basis, the spokesman said pro-rata allocation was against the spirit of the book building.
Further, the same hampers fair price discovery besides exposing the book building process to manipulation by the investors by making bid immediate before the closing of the bidding for huge number of shares.
To demand on small investors’ participation, the spokesman said actually the book building was held for price discovery of the share of the issuer.
Currently, he said, only institutional and high-net-worth individual investors were allowed to participate in the bidding process.
“They are expected to have necessary capabilities to do proper due diligence of the issuer and the share,” he justified.
On the other hands, the small investors normally did not have such capabilities, the spokesman said.
“Small investors are allocated at least 25% shares in each IPO after the book building,” he said. -Ends
Since there is no accountability in this country, not one dept / person will ever work with honesty….period. " Bribe & influence have replaced the system or one might say, it is what the system is ". Unless this mindset is CHANGED as per IK / TuQ, no one will able to change the system. This mindset is going to create chaos & anarchy overtime soon. But majority seem oblivious of this fact, but seem very optimistic, forgetting that there is always a limit which even Allah swt has set for all & sundry.
BIASED POLICY. does not provide equal opportunity to all
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