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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » ?Should the SEC regulate pricing policy of Companies @ IPO's

?Should the SEC regulate pricing policy of Companies @ IPO's

Go down  Message [Page 1 of 1]

K.Haputantri

K.Haputantri
Co-Admin
It is an open secret that almost all recent IPO prices were over valued with intent to scoop hard earned money of gilibal investers. They only helped initial directors become rich overnight (who bought shares at lesser prices at rights issues, share splits etc., prior to the IPO and parties in private placements.

The SEC rule on one year lockup of such shares is toothless & also not applicable to certain methods used by some companies.

Therefore we need to urge the SEC to impose new regulations on fair pricing policy of IPO shares as against NAVP, PER, most importantly pre-ipo share issues by way of bonus, splits or rights issues of the company.

Your valuable comments are welcome. So that the new chairman could take action on such issues.

rijayasooriya

rijayasooriya
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Why is this post in prison section ? Shocked
I will move this to talk section.

manula


Vice President - Equity Analytics
Vice President - Equity Analytics
This is a good idea. Rules has to be their for starting price of the IPO to monitor. Play has to start from the begining (from the real valvue)

Rajaraam


Vice President - Equity Analytics
Vice President - Equity Analytics
@K.Haputantri wrote:It is an open secret that almost all recent IPO prices were over valued with intent to scoop hard earned money of gilibal investers. They only helped initial directors become rich overnight (who bought shares at lesser prices at rights issues, share splits etc., prior to the IPO and parties in private placements.

The SEC rule on one year lockup of such shares is toothless & also not applicable to certain methods used by some companies.

Therefore we need to urge the SEC to impose new regulations on fair pricing policy of IPO shares as against NAVP, PER, most importantly pre-ipo share issues by way of bonus, splits or rights issues of the company.

Your valuable comments are welcome. So that the new chairman could take action on such issues.

This is a timely suggestion. This was brought to the notice of former SEC Heads. But they didnt take any action. They were thoughly inefficient.They also supported for this unfair pricing.Hope new management consider this matter as a priority.

UKboy

UKboy
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Yes this is a very good idea however we must not forget the very basic.

Buying shares from each and every IPO is NOT compulsory.

Kumar

Kumar
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
@UKboy wrote:Yes this is a very good idea however we must not forget the very basic.

Buying shares from each and every IPO is NOT compulsory.
Yes that is a fact, most of us overlook.

LongTerm


Senior Equity Analytic
Senior Equity Analytic
I have talked to several educated legal professionals over this issue, and they have told me that neither the SCE or the CSE has any control over the Pricing of an issue.

As long as the Directors of the Company signs off saying the price is fair and reasonable, there is nothing CSE or the SEC can do about it.

The CSE tries to make sure if a Private Placement has taken place, it is clearly stated on the Prospectus. (So people will not say "I did not know they gave thier friends shares at a discount")

SEC intentionally can delay approving a 28A application if they feel that the Private Palcement has been done at an unfair discount. This is after the fiasco of EXPO and SHL.



Last edited by LongTerm on Thu Dec 15, 2011 9:25 am; edited 1 time in total (Reason for editing : Grammartical corrections)

Deva


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
These are very good suggestions, will the regulators wake up from it's sleep and ensure that their duties are performed without keeping loop holes, unfairness to the fees they charge from each transaction.

I believe the regulators atleast have the right to reject an application if there have been pre-ipo share transactions within an year.

K.Haputantri

K.Haputantri
Co-Admin
If the SEC has no tooth on this can the Fair Trading Commission (may be with some amendments to the Gazette) do some thing? Because this is unfair trading! Invite legal experts to comment.

rijayasooriya

rijayasooriya
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
@LongTerm wrote:I have talked to several educated legal professionals over this issue, and they have told me that neither the SCE or the CSE has any control over the Pricing of an issue.

As long as the Directors of the Company signs off saying the price is fair and reasonable, there is nothing CSE or the SEC can do about it.

The CSE tries to make sure if a Private Placement has taken place, it is clearly stated on the Prospectus. (So people will not say "I did not know they gave thier friends shares at a discount")

SEC intentionally can delay approving a 28A application if they feel that the Private Palcement has been done at an unfair discount. This is after the fiasco of EXPO and SHL.
හොරාගේ අම්මගෙන් පේන අහනවා වගේ කියන්නේ මේ වගේ වැඩ වලට
Actually this is a situation in which SEC can intervent without being jokers.

LongTerm


Senior Equity Analytic
Senior Equity Analytic
Guys you have to keep in mind, it is an INVITATION to BUY.
No one is forcing you to put your money...

In any case there cannot be any legal issues with regard to the price since it is beyond the purview of the SEC or the CSE.

Example: Company has done an Pvt Placement @ 5/- and IPO is going to happen @ 15/-
The Prospectus clearly says this has happenned and who bought the new shares: CSE has ensured fair and complete disclosure.
If the IPO is happenning later than 12 months of the Pvt Placement date, you do not need Approval under Section 28A and thereby not required to ask the SEC Permission for anything.

If it is a selldown from the existing shareholders, which is the alternative to a Pvt Placement where you can sell your shares at a discounted price before the IPO to a selected group (e.g. Textured Jersey was a selldown), SEC has no right to intervene since no new shares have been issued.

Trust me on the legalities of these, cos I do this for a living.

Hope this helps.

kam2011


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
If the law needs to be amended to ensure justice for the ppl authorities should do that.

rijayasooriya

rijayasooriya
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
@LongTerm wrote:Guys you have to keep in mind, it is an INVITATION to BUY.
No one is forcing you to put your money...

In any case there cannot be any legal issues with regard to the price since it is beyond the purview of the SEC or the CSE.

Example: Company has done an Pvt Placement @ 5/- and IPO is going to happen @ 15/-
The Prospectus clearly says this has happenned and who bought the new shares: CSE has ensured fair and complete disclosure.
If the IPO is happenning later than 12 months of the Pvt Placement date, you do not need Approval under Section 28A and thereby not required to ask the SEC Permission for anything.

If it is a selldown from the existing shareholders, which is the alternative to a Pvt Placement where you can sell your shares at a discounted price before the IPO to a selected group (e.g. Textured Jersey was a selldown), SEC has no right to intervene since no new shares have been issued.

Trust me on the legalities of these, cos I do this for a living.

Hope this helps.
We have to understand the situation in our country.How many people can understand the prospectus ? When there is an IPO there is lot of promoting campaigns.So ignorent innocent people get trapped.It is the situation of our country.That is why SEC should do more active intervention on pricing and allowing IPOs.
If the existing rules are inadequate thay can change those rules.

sidath perera


Stock Analytic
Stock Analytic
no one forces you to buy an over valued IPO.

No where in the world does a stock exchange or a regulator dictate the pricing of an IPO. That is for the market to decide. All regulators ask for is proper disclosure and require the investor to decide based on the information.

Only India requires IPO's to have a rating, but they too don't comment on the pricing only on the prospects of the company.

rijayasooriya

rijayasooriya
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
@sidath perera wrote:No where in the world does a stock exchange or a regulator dictate the pricing of an IPO. That is for the market to decide.
What the hell...!!!! It is decided by Directors of the relavant company.

manula


Vice President - Equity Analytics
Vice President - Equity Analytics
@rijayasooriya wrote:
@sidath perera wrote:No where in the world does a stock exchange or a regulator dictate the pricing of an IPO. That is for the market to decide.
What the hell...!!!! It is decided by Directors of the relavant company.

His location is Angoda Hospital ne... That why... Laughing Laughing Laughing

K.Haputantri

K.Haputantri
Co-Admin
I don't think any where in the world directors scoop money from investors through such overpricing. It is happenning only in SL. Actually, they should earn money by competing with others & offering goood products & services. Are they good at that. I don't know, but they are good at over pricing recently. This is why Sri Lanka specific rules are required.

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