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14% IPOs traded below issue prices

  • Published at 06:38 pm February 22nd, 2016

Around 14% of the initial public offers (IPOs) in the country’s prime bourse listed since 1984 are currently being traded below their issue prices.

Of the 341 companies that have raised money via the primary market, shares of 45 companies are being traded below their issue prices presently.

Weakest IPOs hit in 2012 when six firms were listed as they gave negative return. 

Regent Textile, listed in 2015, is the latest example of dismal performance. Its share price is currently traded at nearly Tk20 a share, down from its offer value of Tk25 a share.

The worst performing IPOs since 1984 are United Airways (BD), Zeal Bangla, Meghna Pet, Meghna Condescend Milk, Dulamia Cotton, ICB Islamic Bank and Shyampur Sugar.

Former Bangladesh Securities and Exchange Commission Chairman Faruq Ahmad Siddiqi said, “Unjustified IPO price or misreporting on financial statements might be the reasons behind going down from issue price.”

He said share prices might erode after adjustment with the bonus share issued by the firms. “Regulator needs to be very careful on the quality of companies those come to tap the market,” he said.

Another analyst said overall the market valuation is lower now than what was in 2010 when the market was in its pick.

Of the 45 companies, there is no specific sector downfall in IPO price, but most IPOs traded below issue prices took place after 2010.

Out of those companies having their current stock price below the issue price, two was listed in 2015, four in 2014, four in 2013, six in 2012, three in 2011, two in 2010, one in 2008 and four in 2007.

Most of the companies listed in 2011 and 2012 witnessed fall in their earnings per shares immediately after their listings. 

Some of the companies included Deshbandhu Polymer, Rangpur Dairy & Food Products, Zahintex Industries, Saiham Cotton Mills, Generation Next Fashions, GBB Power and Unique Hotel & Resorts.

These track records, according to some analysts, reflects weak due diligence not only on the part of regulator but also investment bankers, said an analyst on anonymity.