KARACHI: The Securities and Exchange Commission of Pakistan (SECP) while discarding concept of price band or cap on the floor price, set the floor price for book building of Hascol at Rs20 per share.
According an SECP release, the commission determined strike price at Rs56.50 per shares through the book building, i.e. 182.5pc above the floor price. It recalled that the SECP on demand of the market, introduced concept of price band on July 24, 2014. The price band was first implemented in the Initial Public Offering of Saif Power Ltd in September 2014. The entire shares under the book building portion of the issue were subscribed at the upper limit of the price band.
It is to be noted that the SECP has no role in setting of the lower limit of the price band. However the book building criteria restricts the upper limit. After book building of Saif Power Ltd, two IPOs of two companies, i.e. System Limited (SL) and Synthetic Products Enterprise Ltd (SPEL) have been held through the book building and both these have been conducted in accordance with the SECP’s above-mentioned criteria. So there is no inconsistency in the SECP’s Book Building policy.
Under the SECP’s Book Building criteria, the issuer has full liberty to fix price band, however, the spread in the price band shall not exceed a certain threshold. In case an issuer is confident that its shares worth high, it may accordingly set the lower limit of the price band high. In case the upper limit on the price band or cap is removed then we may face same situation and complaints as faced in the book building of Hascol Petroleum Limited. As regard to the Association’s proposal regarding allocation of shares on pro rata basis, it is stated that, pro rata allocation in book building is against the spirit of the book building; it hampers fair price discovery and it exposes the book building process to manipulation by the investors by making bid immediate before the closing of the bidding for huge number of shares.
