New listing rule at KSE for launching public offers
By Our Staff Reporter
ISLAMABAD, March 6: The Securities and Exchange Commission of Pakistan (SECP) has approved book-building process as part of the listing regulations of the Karachi Stock Exchange (KSE).
The book-building process of KSE is in line with best international practices and standards, said the commission in a statement issued here on Thursday.
The book-building is, basically a capital issuance process used in Initial Public Offer (IPO), which aids price and demand discovery. It is a process used for marketing a public offer of shares of a company.
This, being another landmark capital market reform introduced by the SECP, will greatly benefit the investors and the issuers, says the commission.
In the book-building process, the price of shares is determined on the basis of market demand and as such the chances of over- or-under-pricing are minimised.
Institutional investors and high net worth individuals will be eligible to participate in this process. Offer of shares to the general public will be at a price equal to or lesser than the price discovered through the book-building process.
The issuer company will also have the option to withdraw its offer from the market if demand for its shares is not sufficient.
Under the listing regulations, the institutional and high net worth investors shall not be allocated more than 75 per cent of the total offer through the book-building process and not less than 25 per cent of the total offer shall be allocated to the general public.
It will be the discretion of the issuers to either adopt the book-building process or the fixed-price method presently followed for IPOs.
With the introduction of the book-building process the number of IPOs is expected to increase substantially, which in turn will offer the investors with additional investment opportunities and also enhance the size and depth of the securities market.
