• Sunday, March 01, 2015

Rights issues were unpopular in 2013

Sarwar A Chowdhury

Six listed firms raised Tk 180 crore through rights shares last year, which was 79 percent lower than in the previous year.
The companies that were all from the financial sector issued 15.51 crore rights shares to raise the amount, according to Dhaka Stock Exchange data.
A couple of factors, including a liquidity glut in the money market, were reasons behind the fall in capital raised through rights shares. The companies did so only to meet their regulatory requirements to strengthen their capital base.
In 2012, nine listed companies raised Tk 865 crore through 49.79 crore rights shares, according to DSE statistics.
A rights issue is an issue of additional shares by a listed company to raise capital from existing shareholders.
With a rights issue, existing shareholders get the privilege to buy a specified number of new shares from the firm at a particular price within a specified time. A rights issue is in contrast to an initial public offering, where shares are offered to the general public through a stock exchange.
“Issuing rights shares by the financial sector firms was mainly to fulfill regulatory requirements to strengthen their capital structure,” said Akter H Sannamat, managing director of Union Capital, a non-bank financial institution.

Companies in other sectors were not interested in raising capital through rights issues as they thought that they might not get fair prices for their shares in a volatile market.
The DSEX, the key price index of the premier bourse, marginally gained 4.3 percent to close last year at 4,266 points. But average daily trade stood at Tk 400 crore in 2013, down by 5 percent from the previous year.
“Besides, the stockmarket regulator was a bit conservative in allowing listed companies to raise funds through rights shares with premium,” he added.

Published: 12:00 am Tuesday, January 14, 2014

Last modified: 9:40 pm Tuesday, January 14, 2014

TAGS: Six listed firms raised Dhaka Stock Exchange regulatory requirements DSE statistics Union Capital non-bank financial institution

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