Institutional investors lose their head while bidding for Walton shares

Walton Hi-Tech Industries is flying high, so it is reasonable to assume there would be a clamour for a slice of the home grown electronics giant. 

But what transpired at the recently concluded book-building session for Walton's initial public offering left most analysts scratching their heads.

Some eligible investors bid as low as Tk 12 for a stock of the electronics manufacturer that logged in profits of Tk 1,376 crore in its last financial year, while some placed bids as high as Tk 765, according to the Electronic Subscription System for EIs.

Such outsize deviation in the amount eligible investors were willing to pay for a stock was never seen before.

"The bidding of Tk 12 and Tk 765 are both unrealistic," said a merchant banker, adding that in no iteration of company analysis would such divergent bids be recommended.

Some put bids at the very high-end expecting a high price in the secondary market through lower free-float.

"They did not consider the real value of the company," he added.

Some 15 eligible investors placed bids upwards of Tk 600 for a share.

One such bidder said on condition of anonymity that his logic was the company's high premium for its potential will lower the free-float shares, so it would be easy for gamblers to manipulate the price.

"General investors will also be hankering for the stock as Walton has goodwill in the market," the bidder added.

As the company's cut-off price is Tk 315, the company's free-float would be less than 1 per cent shares or about 27 lakh shares.

Walton would make its debut on the stock market at around Tk 280, which is about 10 per cent less than the cut-off price.

"A well-performing company will get a high premium -- this is normal. But the eligible investors' expectations of gambling with the stock is seriously shocking," said a top official of a leading asset manager.

The stock market regulator should ask the high and low bidders why they placed such abnormal bids.

A high official of the BSEC said preferring anonymity that the regulator itself is irritated with the abnormal bidding from eligible investors because Walton is not the only case.

In order to get eligible investors to place realistic bids, the regulator has already issued a notice informing them that will get shares at their bidding price.

Despite that, some of the institutional investors are bidding abnormally high or low.

"This is not expected at all. We will look into the matter," he added.

The fact that institutional investors are behaving like retail investors is disappointing, said Khairul Bashar Abu Taher Mohammed, chief executive officer of MTB Capital.

As there is no price bound on the bidding, some are bidding for a small quantity of shares but at a higher price.

"This is influencing others to bid higher," said Bashar, also a former secretary general of the Bangladesh Merchant Bankers Association (BMBA).