CSE to introduce new rules to make IPOs more transparent

10 July 2015 02:33 am - 0 - {{hitsCtrl.values.hits}}

A A A

A couple of rules are being contemplated to be introduced for future initial public offerings (IPOs) at the Colombo Stock Exchange (CSE) to empower potential investors to make better decisions in subscribing to new share issues.

CSE Chairman Vajira Kulatilaka said that the rules are being adopted from the trend setting Dialog Axiata IPO, which took place 10 years ago. The offer was managed by NDB Securities, of which he is currently the Chairman.

“I call it trend setting, because we gave every potential investor a sheet with assumptions and how we did the valuations. We gave the models used also. At the last board meeting we approved a rule to do so in the future. Similarly book dealing was done, and now we’ve come up with the rules to do book dealing in this country,” he said.

He said that the valuations rule, and the yet to be approved book building rule, will make IPOs more transparent by giving more information to potential investors.

The book building rule would compel IPO companies to invite institutional investors to provide valuations on the IPO, figures which would then have to be provided to all potential investors.

“Companies will have to get valuations from institutional investors, and then go to retailers. Currently, it’s hard to get valuations from all investors without the proper IT systems, but during the Dialog IPO we managed to get valuations from retail investors too,” Kulatilaka said.

The new rules come at a timely juncture, as several controversial IPOs had taken place at CSE in the past few years.

Some IPO prospectuses had quoted overly optimistic valuations and assumptions and resorted to bad accounting practices. Some IPOs had been undertaken with the intention of settling past debt, and have not engaged in market trading or adhered to the governance practices of CSE following their IPOs.

Certain stock brokers had advised investors not to subscribe to such shares in the past.

With the valuation sheets provided by the IPO companies, and the book building figures provided by institutional investors, potential shareholders could have a say in the share price before the opening of an IPO.

“This is one step forward. When there’s competition, we can expect the market to come up with their own IPO valuation through bidding, like the Treasuries auctions,” Kulatilaka said.(CW)

Order Gifts and Flowers to Sri Lanka. See Kapruka's top selling online shopping categories such as Toys, Grocery, Kids Toys, Birthday Cakes, Fruits, Chocolates, Clothing and Electronics. Also see Kapruka's unique online services such as Money Remittence,Astrology, Courier/Delivery, Medicine Delivery and over 700 top brands. Also get products from Amazon & Ebay via Kapruka Gloabal Shop into Sri Lanka

Comments - 0

Add comment
Comments will be edited (grammar, spelling and slang) and authorized at the discretion of Daily Mirror online. The website also has the right not to publish selected comments.

CSE to introduce new rules to make IPOs more transparent

Comments - 0

Add comment

RECOMMENDED

‘Spike in blast fishing’ poses renewed threats to Sri Lanka’s marine ecosystems

UDA owned land in Thalawathugoda; UDA Minister Prasanna Ranatunga under the spotlight for forceful occupation of reserved land

Loss-making SMIB faces political pressure in recovering loans

Baltimore Bridge Collapse: MV Dali, SL authorities anchored in mystery?

Has Sri Lanka become a potential hub for the illegal wildlife trade?

Spotlight on Moragahakanda Development Project Moragolla villagers lose livelihoods and down to one meal a day

Ambitious Sri Lankan jobseekers ‘trafficked into Ukraine war zones’

Most Viewed in News

New Visa procedure implemented

Sri Lankan among NASA’s new crew for next simulated Mars journey

Former MP Palitha Thewarapperuma dies from electrocution

Street food vendor arrested for verbally harassing foreigner

Two racing drivers arrested over Fox Hill tragedy

Racing event tragedy leaves seven dead including eight-year-old child

MIRROR CRICKET

Is Chamari Athapaththu Sri Lanka’s greatest cricketer ever?

Athapaththu back atop ICC Women’s ODI Batting Rankings

Chamari Athapaththu sets big goal for T20 World Cup

How does CSK get best out of Pathirana?

TODAY'S HEADLINES

SL took minimal steps to punish officials who committed human rights abuses: US report

Iranian President’s visit Sri Lanka withstands western pressure

25 tons of solid waste disposed along Sri Pada route

Temperature rises to ‘Caution’ level

Sri Lanka secures third spot in South Asian Kurash Championship 2024

Athapaththu back atop ICC Women’s ODI Batting Rankings

Army forms committee to probe Diyatalawa Fox Hill Supercross accident

Indian cricket manager indicted for Legend Cricket League match-fixing allegations