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| Downtrend delays IPO subscription of Summit Purbanchol |
A lacklustre performance of the primary market has forced Summit Purbanchol Power Company Ltd to postpone its IPO subscription.
The primary market is losing its shine mainly due to a sluggish secondary market.
The suspension came at a meeting of the Securities and Exchange Commission yesterday, after the Summit Purbanchol requested the stock market regulator to postpone the IPO subscription, which was scheduled to begin on July 15.
A revised date for the IPO (initial public offering) subscription will be announced later, the SEC said in a press statement.
Earlier on April 24, the SEC approved the IPO prospectus of Summit Purbanchol Power Company, a subsidiary of Summit Power Ltd.
The company will raise Tk 135 crore from public through floating three crore ordinary shares of Tk 10 each at an offer price of Tk 45, including a premium of Tk 35.
In the recent times the newly listed companies were failing to draw considerable response both in the primary and the secondary markets.
In the primary market, the IPOs were being undersubscribed, while in the secondary market, the share prices were going down below the offer price.
Unique Hotel and Resorts Ltd, the owner of The Westin Dhaka, is the latest victim of the downtrend, as its stocks are currently being traded below the offer price of Tk 75.
On the Dhaka Stock Exchange yesterday, each Unique Hotel share was traded between Tk 71.20 and Tk 75.90, before closing at Tk 72.80.
Before Unique Hotel, the prices of Saiham Cotton Mills came down to below its IPO offer price on the trading debut.
On June 24 on its first trading day, each Saiham Cotton share, offer price of which was Tk 20 including Tk 10 as premium, closed at Tk 19.90.
The lacklustre performance of the primary market is mainly due to a sluggish secondary market.
The primary market deals with the issuance of new securities. Previously issued securities and financial instruments in the primary market such as stocks, bonds, options and futures are bought and sold in the secondary market.
Market insiders said the primary and the secondary markets are inter-related. It is very usual that the primary market will remain attractive as long as the secondary market is bullish.
As the secondary market is not performing well right now, it is obvious that it will leave an impact on the primary market as well, they said.
Since the price debacle in the secondary market in January last year, a downward trend continues in the price indices. DGEN, the benchmark index of the Dhaka bourse, saw a sharp fall yesterday too, declining 156 points or 3.76 percent.
At yesterday's meeting, the SEC also asked the stockbrokers and merchant banks to submit a report on implementation of the compensation package, which was recommended by the government for retail investors.
The stockbrokers and merchant banks will have to submit the report to the stock exchanges within August 14, and the bourses will send a comprehensive report to the commission within August 30.
As per the compensation package, the small investors, who suffered losses due to the last year's debacle, will get a waiver of up to 50 percent of the interest on margin loans.
The interest to be waived must be accrued within the calendar year of 2011 or the financial year of 2011-12. It also recommended giving the adversely affected small investors the scope to pay the remaining 50 percent of the interest through quarterly installments in three years.
As per the compensation package, the retail investors are also given 20 percent quota of all IPOs -- government and private -- to be issued in 2012 and 2013. It means, if an IPO size is Tk 100 crore, Tk 20 crore will be allotted for the small investors who incurred losses.
Source :The Daily Star
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