Regulator resets criteria for rights share issue

A listed company must have profitability records for three preceding years and a credit rating if it wants to offer rights shares at a premium.
The Securities and Exchange Commission made the criteria compulsory, approving the amendments to the rules of issuing rights shares at a meeting yesterday with the SEC chairman, M Khairul Hossain, in the chair.
A rights issue is an issue of additional shares by a listed company to raise capital from existing shareholders. The existing shareholders have the privilege to buy a specified number of new shares from the firm at a particular price within a specified time.
In contrast, a firm can also raise funds through an initial public offering (IPO), where shares are issued to the general public through the exchanges.
“The commission approved modifications to the rights issue rules after taking into account public opinion on the amendment,” Saifur Rahman, spokesman to the SEC, said after the meeting.
Based on the opinions of the public and experts, the regulator includes some issues in the proposed amendment, which were published in different national dailies, he said.
He said in addition to the profit records and credit rating, information on a rights offering by a listed firm will have to be posted on the websites of Dhaka and Chittagong stock exchanges and the issue manager.
“The rights offering announcement will have to be posted on the websites within three days of regulatory approval and the web postings will have to be kept until the subscription period ends,” he said.
The underwriters will have to submit underwriting and portfolio management statements to the commission, said Rahman, also an executive director of SEC.
“The articles of memorandum, returns of allotment of shares and directors' particulars will have to be submitted along with the application for issuing rights to the commission. Besides, summarised cash flow statements, profit and loss statements, balance sheets and a report on dividend declaration and distribution in the last five years will also have to be submitted,” he said.
On September 27, SEC approved a draft of the proposed amendment to the Rights Issue Rules 2006 to ensure more transparency in listed firms raising funds.
At yesterday's meeting, SEC also approved the initial public offerings (IPO) of GSP Finance Company (Bangladesh), which will raise Tk 50 crore through an IPO.
The company, a non-bank financial institution, will float two crore ordinary shares of Tk 10 each at an offer price of Tk 25 each, including a premium of Tk 15, said Rahman.
ICB Capital Management Company is the issue manager for the GSP Finance IPO.
Its weighted average earning per share as of December 2010 was Tk 1.75 and the net asset value per share was Tk 25.61.
SEC also approved the trustee deed of UCB Infrastructure Fund, a close-end mutual fund.
The size of the fund will be Tk 1,000 crore and the asset manager of the fund is Alif Asset Management, the SEC executive director added.