BSEC offers exit arrange for poor performers
The Bangladesh Securities and Exchange Commission (BSEC) recently issued a directive offering companies not performing well an exit plan that could help protect small investors in the event of delisting.
Whenever a company's performance goes down, it really is either traded as a junk stock in the over-the-counter market or gets delisted. Regardless, the investors get following to nothing from their stocks.
United Airways is normally one such case since it was delisted previous month by purchase of the marketplace regulator.
After the delisting, general investors, taking into consideration the face value of their stocks, incurred losses of around Tk 786 crore.
Meanwhile, Beximco Synthetics put on delist itself from the currency markets last September.
With the brand new directive though, either the regulator or company itself can delist the company in question by repaying its investors, according to BSEC Spokesperson Rezaul Karim.
Those who want to keep a stake in the company must buy out the other investors so that when it's delisted, any new investors will never be impacted as the existing ones would obtain money back, Karim said.
"The BSEC developed this exit plan to be able to protect investors," he added.
Under the directive, listed companies from a bourse's main trading board, delisted securities trading in the over-the-counter marketplace, delisted securities trading beneath the alternative trading boards and all other securities meet the criteria for the exit method.
Any company that has not been in commercial operation for a lot more than 2 yrs, has incurred a net damage for three consecutive years, has accumulated losses that exceed its paid-up capital or does not declare any money dividends for three consecutive years is qualified to receive delisting, the BSEC said in its directive.
The BSEC can also delist a company for just about any involvement in money laundering, financing terrorists or any other illicit business as defined by the state.
The offer price for investing in securities under the exit plan will be any of the following: whichever is more significant such as the face value or issue price during the business's initial public offer, previous trade price on (or before) the date of suspension of trade, net asset value (NAV) per share according to the last audited financial statements.
The stock market concerned shall then open and keep maintaining a joint escrow account, featuring the handling directors of the respective bourse, limited to producing payments on the securities bought or acquired beneath the exit plan, said the directive.
The consideration for securities surrendered, sold or transferred beneath the exit plan will be at offer price and settled in cash by making payments from these escrow account.
The sponsors will primarily deposit at least 50 per cent of the total amount of consideration calculated based on offer price to the account preserved by the stock market concerned in cash, the directive read.
The remainder will be deposited either in cash or by a bank guarantee towards the stock market concerned.
Meanwhile, a suspense accounts will be opened to keep the shares of small investors.
The BSEC's initiative to create an exit plan is a superb sign for the currency markets, said stock investor Abdul Mannan.
Investors' confidence will surge if listed businesses follow the directive because they are certain to get at least some money back from a good delisted company.
"Recently, some companies had been delisted and investors got little or nothing," he added.
The commission shall accord its consent-in-principle within 30 business days of receipt of a complete application, if such an application is acceptable to the commission.
If the application isn't acceptable, the regulator will issue a rejection letter, stating the reason why for such rejection, within 30 working days of receipt of the previous correspondence with a copy thereof to the exchange.
On declaration of completion of the exit method, the commission shall direct the stock exchange concerned to eliminate the securities from its trading systems if traded with any program.
The stock exchange will be in charge of ensuring all compliances relating to execution of the exit plan, the directive said.
