KARACHI: A bitter battle is brewing between two brokerage firms, AKD Securities and BMA Capital Management on a most unlikely issue: Who completed the first book building exercise in the country?

Shots across the bow were fired by BMA on Thursday, when a statement was issued contending that it was ‘incorrectly referred to AKD Securities Limited share offering for Ghani Gases Limited as Pakistan’s first book building exercise’. (refer to story published the previous Sunday). And the BMA statement went on to say: ‘On the contrary, BMA Capital was the first institution to complete a book building exercise in Pakistan in December 2006 for Oil & Gas Development Company Limited (OGDC)’. It said that BMA Capital was Domestic Book Runner on that transaction and along with Goldman Sachs and Citigroup were the Joint Lead Arrangers for the Institutional Offering of 390.588 million shares in the form of Global Depository Shares (GDRs) at $18.90 per GDS and 18 million ordinary shares at Rs115 per share. ‘Therefore, in fact, BMA Capital has the privilege of completing the first book building exercise in Pakistan almost three years prior to AKD Securities doing so,’ the statement concluded.

In answer, the AKD Securities fires back. The argument by the brokerage firm received by Dawn on Saturday runs thus: ‘For all practical purposes Ghani Gases Limited Offer for sale was the first domestic book building exercise: (1) It was the first such transaction under the new SECP regulations brought in 2008. (2) The OGDC transaction of Nov, 2006 was part of international GDS offering via book building. (3) The price discovery for OGDC transaction occurred in the international markets for GDS ($18.9 per GDS). The local price of (Rs115 per share) simply mimicked the internationally set price. Thus, domestic investors were effectively price takers rather than price discoverers as happened in the case of Ghani Gases Limited (4) The Ghani Gases transaction was a ‘Primary’ offering where domestic investors for the first time had to engage in genuine price discovery without an explicit pre-existing benchmark. In the case of OGDC, the transaction was a ‘Secondary’ offering as OGDC shares were already listed on the Karachi Stock Exchange and, as stated above, price discovery was driven by foreign investors. (5) Out of the 9.5 per cent stake from paid-up capital offered by OGDC, 9.08 per cent was allocated to foreign institutional investors while only 0.42 per cent was allocated to domestic institutional investors and none to domestic High net worth individuals, indicating that the transaction was targeted primarily at foreign investors. In the case of Ghani Gases, 6 per cent of the equity capital was offered to domestic investors via book building (60 per cent) and 4 per cent (40 per cent) is to be offered via traditional IPO. The book building based price discovery (which is the purpose of book building transaction) has been entirely domestic.

The AKD Securities concludes: ‘Based on the above points, AKD Securities believes that Ghani Gases transaction is indeed the first domestic book building transaction under the new SECP regulations of 2008.’

Though many stock brokers are amused at the triviality of the matter, the contestants appear to have dug in their heels for a long drawn out battle. An observer said that it has to be seen if the two well-known firms are able to sort out the issue between themselves or the regulator would be pulled into the matter for a verdict.

It might require fishing out old books, wiping the dust off and leafing through them to arrive at a decision. From discussion with some of the old gurus at the market, it transpires that many might not opt to stand up as witness before the regulator (if invited to do so), but just to watch (and may be chuckle) from a distance.