BSEC blames merchant banks for absence of IPOs

The Bangladesh Securities and Exchange Commission (BSEC) has blamed merchant banks for the complete absence of initial public offerings (IPOs) over the past one and a half years, saying no IPO could be approved because no applications were submitted during the period.

Speaking at a press conference today (14 January), BSEC Director and Spokesperson Mohammad Abul Kalam said following the 2024 July uprising, merchant banks did not submit any IPO proposals, resulting in zero approvals.

Although the new commission had been working on revising the IPO rules after assuming office, the submission of IPO applications was never suspended, he added. 

"Unfortunately, even under the previous rules, no company came forward to apply for an IPO after the mass uprising, despite having the opportunity to do so under the Public Issue Rules, 2015," he said. "As there were no applications, the question of verification or approval by the commission did not arise."

Placing responsibility squarely on merchant banks, the BSEC spokesperson said, "They could have submitted applications. Without applications, how can BSEC scrutinise or approve IPOs?"

He also noted that during the tenure of the previous commission, six IPO applications were under process, of which five were cancelled and one was withdrawn due to specific and serious deficiencies.

The press conference was organised at the BSEC multipurpose hall in Agargaon to explain various aspects of the Bangladesh Securities and Exchange Commission (Public Offer of Equity Securities) Rules, 2025.

Explaining the new IPO rules, Abul Kalam said the revised framework was finalised after extensive consultations with stakeholders to make the IPO process more transparent, market-driven and accountable. 

Since assuming office, the new commission has been actively working to bring quality and fundamentally strong companies to the capital market, he added.

He said discussions with issuers and issue managers revealed several structural problems – particularly related to pricing – that had discouraged good companies from going public. The lack of transparency and market alignment in IPO pricing had created a confidence gap among potential issuers.

To address this, the commission formed a task force and undertook reforms, including measures to ensure greater transparency and rationality in the pricing process. "With these reforms, pricing will no longer be a major barrier for companies seeking listing," he said.

The new rules strictly prohibit cartelisation, artificial price bidding and placing bids beyond actual financial capacity. Six specific conditions have been imposed to prevent such practices, along with penal provisions for violations.

"These restrictions are meant to ensure that entities without real capacity to purchase cannot intentionally quote inflated prices to mislead the market," he said, defining cartelisation as secret collusion aimed at manipulating prices for unfair gains.

He also said the commission received 170 opinions on the draft rules from general investors, institutional investors, and other market participants, including 38 detailed analytical submissions. 

Each comment was reviewed in detail during commission meetings, and issues with broad stakeholder consensus were incorporated into the final rules, he added.

He also pointed out that the 2006 IPO rules lacked clarity on critical issues such as merit-based evaluation, physical inspection, stock exchange recommendations, and issuers' freedom to choose a stock exchange. 

These gaps have now been addressed. The new rules also clarify that issuers are not required to apply to both stock exchanges and may choose either one, he said.

The press conference also noted that earlier fixed-price IPOs were often negotiated rather than market-driven, creating moral hazard. Under revised rules, the commission has restored a true book-building system, tightening and improving transparency in indicative price discovery. 

Issuers and issue managers must now justify prices using valuation methods and validate them through roadshows, securing at least 40% demand from eligible investors. 

The event was attended by BSEC Executive Director Hasan Mahmud, Additional Director Lutf ul Kabir, and Joint Director and Public Relations Officer Shariful Alam.