CSE launches book building system

February 24, 2010

Chittagong Stock Exchange Ltd. has become the first bourse of the country to launch the Book Building System, the mechanism of fair price discovery of shares.
With the bidding for shares of Ocean Containers Ltd. (OCL), a local enterprise engaged in container business, CSE has pioneered the long waited Book Building System, a widely practiced method of price discovery of shares. Earlier OCL was listed on November 03 2009 for the first time under the Direct Listing Regulation as well as Book Building method and received permission of CSE to offload shares on the bourse. The book-building software hosted at CSE has been used to start the trading. In the initial stage of the bidding only institutional investors such as banks, financial institutions, insurance companies, stock dealers and merchant banks will participate for the bidding. Normal trade for the General investors will start two days after the transfer of the share of OCL allotted to the eligible institutional bidders is completed.
The eligible institutional investors participate in a three day bidding starting from February 22 at 6.00 pm to 9.00 pm to set the final price. The bidding will continue up to today. The institutional investors are to fix the final price and this will be a reference price for the general investors.
OCL has been allowed to sell 10.71 million shares to general investors and 1.19 million shares to institutional investors and the indicative price of each share is Tk 121.40. To fix the indicative price of the OCL share, Platinum Securities, Eastland Insurance, National Housing, Continental Insurance and National Securities and Consultants submitted their bids and the average of their bids is the indicative price.
In the price discovery phase through book building, bidders cannot quote 20 per cent more or less than the indicative price, meaning they will have to offer between Tk 98 and Tk 145 for each share.
The book building method was introduced in March last year, aiming to encourage private-sector entrepreneurs to list their companies on bourses at fair prices.
Using this book building method, institutions bid for shares through which the price is discovered.
The institutional bidders will be allotted security on pro-rata basis at the weighted average price of the bids that would clear the total number of securities being offered for the institutional bidders.
The institutions will not be allowed to sell shares in the first 15 trading days under the lock-in system.
The OCL is a pioneer for inland container depot and container freight stations in Bangladesh. Its activities, though initially were Ltd. to storage of empty containers, now comprises of stuffing and un-stuffing of more than 7,000 containers a month and a daily empty storage of 1,800 containers.

Courtesy of The New Nation

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