Manipulators benefiting from book building: CPD
The introduction of book building system has turned out to be a tool for manipulating market prices, the Centre for Policy Dialogue has observed.
Instead of ensuring competition among big investors at the 'price discovery' stage, the market syndicates are abusing it for placement shares at an artificially high price, the CPD said yesterday.
The artificial price is being maintained for sometime (particularly till the lifting of the lock-in period (15 days) and after that investors are found to offload their shares at higher prices, said the think-tank.
Book building is a new system in Bangladesh and only three instances of such practice are there.
The CPD analysis found those who hold the private placements took out a substantial amount of money by selling shares at high prices during the first one month. As a result, share prices of a particular company fell by 33 percent within one month and 50 percent in the next two months and did not rise thereafter.
“Total capital flight during the first 15 days from the transaction of the shares of this company was estimated to be at least Tk 83.7 crore,” the CPD said. In another case, the total flight of capital was Tk 64.8 crore only in the first two days of trade.
For a third company, the indicative price did not fluctuate so much, CPD said.
However, the SEC did not take any measure to address such abnormal market behaviour and abuse by manipulators.
“We do not oppose the book building system, but we want a proper system to be followed,” said Debapriya Bhattacharya, CPD's distinguished fellow.