Three large-cap companies including Berger Paints Bangladesh are set to be offered with time extension to offload more shares in a bid to avert negative impact on market prices.
The Bangladesh Securities and Exchange Commission (BSEC) has decided to consider a time extension after bilateral discussions recently held with the companies.
Apart from the Berger, Investment Corporation of Bangladesh (ICB) and Walton Hi-tech Industries are required to offload more shares.
Asked, the BSEC chairman Prof. Shibli Rubayat Ul Islam said the companies' share prices will decline leaving a negative impact on the market if more shares are offloaded at a large scale.
"The companies sat with us and we have asked them to offload shares slowly. The companies will be offered with an extended time-frame to offload more shares," Mr Islam said.
The BSEC chairman, however, said the timeframe which will be extended is yet to be defined.
Presently, ICB has 3.19 per cent free float shares, Berger 5.0 per cent and Walton 0.97 per cent in the market.
As per the BSEC order, the ICB is required to offload at least 6.81 per cent, Berger 5.0 per cent and Walton 9.03 per cent more shares.
On September 13, 2021, the securities regulator asked the companies to offload more shares as a new provision of offloading at least 10 per cent shares was included in the public issue rules.
The commission asked the companies to offload maximum 1.0 per cent of the required amount of shares per month and complete the job of share offloading within one year.
Another reason behind the regulatory directive regarding offloading more shares is to avoid price manipulation amid a very limited amount of free-float shares.
The share price of Walton closed at Tk 1160.30 each, ICB 123.50 each and Berger Tk 1739 each on Monday.
Insiders said the companies were not happy to offload shares as their share prices declined following the regulatory directive.
A day after issuance of the BSEC's directive, the three companies topped the chart of top 10 losers after losing share prices ranging between 6.13 per cent and 8.66 per cent on Dhaka Stock Exchange (DSE).
Asked, the managing director of Berger Paints Bangladesh Ms Rupali Chowdhury said they are working to set a mechanism of offloading more shares.
"There was no binding of offloading 10 per cent shares while our company went public. The share price of our company will decline following offloading of more shares," Chowdhury said.
She said their company is working to comply with the directive through a mechanism to be fixed soon on consultation with the BSEC.
The ICB's managing director Md. Abul Hossain said offloading of more shares will depend on the government's decision.
"We will place the proposal in the next board meeting. After making a decision, we will seek the government's decision. The government will take the decision whether more shares will be offloaded," Mr Hossain said.
Asked, an official of Walton said their company is working with the securities regulator to find out a solution to executing the regulatory order.
He said the value of their company's shares required to offload per quarter is very large and it will leave a negative impact on the market.
"Our company is seeking a solution from the BSEC so that no negative impact is observed on share price," said the official, adding that they are bound to comply with the regulatory directive.