For the first time since 2003, the country’s twin bourses have witnessed a zero rise in capital through rights offering this year as the stock market regulator did not approve any single company’s proposal to raise fund.
According to the Dhaka Stock Exchange (DSE) data, in 2015, a total of six listed companies submitted proposal to the Bangladesh Securities and Exchange Commission (BSEC) for approval of offering rights shares, but none of them got the nod.
While in 2014, a total of nine listed firms raised about Tk20,630 million by offering 775 million rights shares.
A rights issue is an invitation to existing shareholders to purchase additional new shares of a listed company in order to raise its capital.
Talking to several companies, the Dhaka Tribune came to know that BSEC did not approve rights offer proposals of any company so far.
“We placed our proposal to the regulator complying with rules and replied all queries properly, but to no avail,” a top executive of a company told the Dhaka Tribune, seeking anonymity.
Despite the fact that all queries were answered in black and while, the regulator is now raising other verbal queries, he said.
The executive went to the extent of saying that it might so be that they were not eligible, but isn’t there any company entitled to offer rights shares? he posed question.
He also alleged that the BSEC is very slow in reviewing the proposal.
A listed company offers rights shares to raise funds with an investment plan to expand businesses, a high-up of another company said, adding that if the regulator does not approve their proposals, all their plans will go astray.
If the stock regulator considers the secondary market in allowing rights offering, it will be very unfortunate and ultimately hurt business expansion, he added.
The official alleged that it is the internal decision of BSEC that it won’t allow any rights offer this year which will hit the business as a whole.
According to the former financial adviser to caretaker government, ABM Mirza Azizul Islam, BSEC might have a view that if the supply of shares outpace demands, it may impact prices.
“But I think, the regulator should approve rights offerings, if all documents are accurate and let the market judge itself.”
Raising funds through rights shares is a standard and international practice, and the slowdown in the stock market might not be the reason behind disapproving the rights offerings, he said.
“The companies show more interest in offering rights shares when the market situation is good, but they also become reluctant to do so when the market faces slowdown,” Ahmed Rashid Lali, a vice-president of Dhaka Stock Exchange (DSE) told the Dhaka Tribune.
“If a company complies with the rules, I think the regulator should approve the proposal,” he added.
“The aspiring companies have taken much time to submit required documents, which caused their delay in giving approval,” BSEC member Arif Khan told the Dhaka Tribune.
“We cannot approve any rights offering without any full-fledged compliance,” he said.
It is not rue that BSEC did not allow the rights offerings considering slowdown in the secondary market, Khan replied when asked about the allegation by the companies.
But process is underway and the decision in this regard will be made soon, he added.