Retail investors are demanding a 20 to 30 per cent discount on shares offered through the book-building method, challenging a proposed securities rule change that would require them to pay the cut-off price determined through institutional bidding.
Around 15 to 16 investors submitted a written application to the Bangladesh Securities and Exchange Commission (BSEC) on Monday, urging it to reconsider the proposal and restore the price concession.
The draft amendment to the Bangladesh Securities and Exchange Commission (Public Offer of Equity Securities) Rules, 2025, makes no provision for retail investors to buy shares below the cut-off price. Under the proposal, eligible institutional investors would receive shares at their respective bid prices, provided those bids are not below the cut-off price. General investors would have to pay the full cut-off price.
The 2025 rules had already removed the discount previously available to general investors, requiring institutional and retail investors to pay the same price. Under the 2015 Public Issue Rules, retail investors received a 10 per cent discount to the cut-off price determined through institutional bidding. In special cases, the BSEC raised the discount manyfold.
Investors now want that concession restored.
“Earlier, we general investors could buy shares at 20 to 30 per cent below the cut-off price. Now the cut-off price is being determined, but we will no longer get the opportunity to buy at a lower price,” investor Md Shahjahan said.
Another investor, Mohammad Abu Sayem, questioned why retail investors should pay the same price as institutional bidders.
“Why should we, as general investors, buy shares at the bid price? We should be offered shares at a 20 to 30 per cent discount,” he said.
BSEC officials argue that a discount is unjustified if the cut-off price represents a share’s fair value. They say pricing should be left to market forces and that a regulator-imposed concession could undermine market-based price discovery. They also cite similar practices in international markets, where the cut-off price applies to general investors.
BSEC spokesperson and Executive Director Abul Kalam said the 2025 Public Offer Rules require general investors to receive shares at the cut-off price, adding that the same practice is followed internationally.
The proposed pricing arrangement has also raised concerns about possible collusion among institutional bidders to manipulate the cut-off price. BSEC officials say institutions found to have coordinated bids to influence prices could face cancellation of their allocation quota or licence, enforcement action or criminal cases.
The 2025 rules introduced, for the first time, a clear legal basis for investigating manipulation or collusion in bidding. Previously, there was no specific legal provision for investigating such allegations. The commission can now investigate complaints, but has no automated system to detect collusion. Any wrongdoing must be established through an investigation based on complaints or information received, officials said.
Mohammad Moniruzzaman, former vice-president of the Bangladesh Merchant Bankers Association, also supports allocating shares to retail investors at the cut-off price. He argues that institutional bidding can reduce manipulation because investors must bear the financial consequences of their bids.
Institutional investors have to buy shares at the prices they bid. If an institution bids too high to influence the market, it could incur losses if the market later values the shares below its bid price. Those involved in bidding must also answer to their institution’s board, he said.
Lock-in requirements provide another safeguard, Moniruzzaman said. Institutional investors cannot sell all their shares on the first day of trading and must retain a portion for a specified period. Companies publish quarterly financial statements during that time, and weak earnings or business performance could drive their share prices down.
He said determining a share’s fair value was difficult and should be left to market demand and supply rather than administrative pricing. IPO shares in international markets sometimes lose value on their first trading day before recovering later, he added.
Moniruzzaman said earlier attempts by the BSEC to set share prices through a formula often resulted in institutional investors bidding at the same rate, restricting competition and genuine price discovery. At the same time, issuers could lose interest in entering the capital market if they failed to secure their expected prices.
The pricing mechanism should therefore encourage both issuers and investors to participate, he said.
Previous book-building IPOs illustrate the scale of discounts once available to retail investors. Best Holdings, which entered the market in 2024, had a cut-off price of Tk35 a share, but general investors were offered shares at Tk24, a 31.42 per cent discount.
For Asiatic Laboratories, the cut-off price was Tk50, while general investors were offered shares at Tk20, a 60 per cent discount.
