In the technical, and often puzzling, world of finance, an initial public offering (IPO) is when a private company goes public by listing in the stock exchange, where its shares or stocks can be publicly traded.
A thriving IPO market usually indicates robust economic activity, but this year, the Dhaka Stock Exchange (DSE) saw a sharp decline in IPOs with only six companies and a mutual fund going public and raising a total of Tk219.25 crore, compared to Tk849.30cr last year.
According to some industry insiders, this 74% decline is mainly due to inefficiency and tardiness at the Bangladesh Securities and Exchange Commission -- the main regulatory body that decides whether a company can go public or not -- which has been delaying its approval of pending IPO applications.
However, it is also possible that this is just an adjustment delay since the government recently introduced new rules and methods related to IPOs, and regulators may be taking some time getting used to them.
One way is for the government itself to offload more shares of state-owned enterprises into the market. This not only increases the number of IPOs, but also leads to increased transparency and greater efficiency by holding managers and directors at government-owned corporations accountable.
Though Industries Minister Amir Hossain Amu has said that the government is planning to do so, that might fix only part of the problem.
If the number and value of IPOs remain low next year, it is going to hold back economic growth as firms looking to expand will be unable to access the capital market. A healthy IPO environment is important for the economy, particularly for small and medium-sized enterprises (SMEs) which have an otherwise limited fund-raising capacity.