BB discourages private placement in bank IPO

The central bank on Monday advised the Securities and Exchange Commission (SEC) to encourage banks in raising funds through floating initial public offering (IPO) rather than private placements.

Sources said most of the third generation private commercial banks have applied to the capital market regulator seeking permission to raise funds from the capital market through share floatation.

In most of the cases, the banks wanted to offer only a small portion of the total amount to the public and manage the rest through private placements.

Sources said the stock market recently had been riding on bank stocks giving higher returns to the shareholders. The new banks showed interest in pre-IPO placement for majority of their shares and submitted a list of prospective investors to the SEC, leaving aside a very small amount for public.

A bank, which went public last month, raised Tk 30 crore through pre-IPO placement and offered shares worth only Tk 10 crore to the public.

Considering the above, the SEC sought opinion from the Bangladesh Bank whether to encourage or discourage private placements in banks' shares. The central bank advised the commission to discourage private placement before offering shares to general shareholders.