GP makes history but downside remains

As expected, it was more of a 'mar mar cut cut' situation on the debut trading of the Grameenphone (GP) shares on the bourses last Monday.
Most investors, both seasoned and new-entrants, remained glued to computer monitors at home, offices and brokerage houses, watching price movements of the issue that has made history, in terms of its size, investors' response and the single-day boost to the benchmark DGEN.
On the first day of its trading, GP, which mopped up from the market Tk. 4.9 billion through IPO last month and an equivalent amount through per-placement several months back, posted a rise of 1673 per cent to close at Tk 177.30 from its IPO price of Tk 70, including a premium of Tk 60, a share.
Some market experts have described the developments centering the GP issue a good omen for the country's capital market, saying that both sellers and buyers have displayed 'maturity' on their part on the first two days of trading. One expert, who is quoted frequently in the media, has even termed the ruling market price of the GP issue as 'fair for such a large company'.
The euphoria over the GP issue among the investors has been partly because of its size and the very image of the company and partly due to the comments made, from time to time, by top bosses of the relevant organizations and, to some extent, excessive media attention.
The fact remains that high market price of its shares does not mean anything, in terms of financial gains, to a listed company. However, theoretically, the rise and fall in demand is dependent on the performance and dividend payment of the company concerned. An enlightened management does always value the investors' perception about a listed company.
Whether the ruling market price of GP is ' fair' or not only future will decide. What should be important for a long-term investor is the return he or she would be getting from the company on his or her investment at the end of the year in the form dividend. The size of the issue will be pretty important here.
However, investors who are more interested in market gains bother least about dividend income. These days, long-term investors who are choosy and are unwilling to put in their money on stocks of companies with weak fundamentals are rarely seen in the market. For they find the prices of the stocks having strong fundamentals, in most cases, well beyond a rational level.
Apparently, the bourses are not that interested in this type of investors. What they aspire to see is an ever-growing market abuzz with investors making frequent transactions. It matters little to them whether they are fly-by-night investors or not.
Despite the fact that the developments at the share market are no way relevant to the goings-on in other major areas of the economy, most people would heartily welcome the robust growth of the market. There are, however, a few downsides that the management of the bourses would like to downplay. But the Securities and Exchange Commission (SEC) cannot ignore a few unpalatable developments associated with the current growth of the market. For in the event of a debacle, everybody would point finger at the Commission.
There is no denying that all the stakeholders do need to work in unison for the healthy growth of the capital market. But, at times, there surfaces a conflict of interests. For instance, the SEC is mandated to take tough measures for protecting the interest of the investors. But other stakeholders may not like the SEC actions. So, if such stakeholders are allowed to have a finger in every pie, the Commission might find hard to take a tough stand when it is needed most. So, the SEC needs to maintain its independent status and go for what is necessary for a stable growth of the market.
While doing so, the securities regulator should not be at all disturbed by street demonstrations by a handful of so-called investors. Such demonstrations are stage-managed and general investors are no way involved in the same.
As a first step towards straightening up things, the SEC should look into the existence of a large number of fake Beneficiary Owner (BO) accounts. The main reason for investors making long queues for IPO subscription and subsequent high price of new shares is the presence of fake BO accounts. Allegation have it a substantial part of the estimated 2.2 million BO accounts is fake. In the event of detection of such accounts and their cancellation would help remove a few distortions in the market.
There are reasons to be elated by the fact that the market has well absorbed a large issue like the GP. But the market needs some more large issues to dilute the investors' attention to some selected shares. In addition, the SEC should advice the investors to go through the recently published quarterly financial statements of the listed companies while making their investment decisions. That would serve the purpose behind the SEC asking the companies to publish the statements.

GP shares debut with 'rational price'

Dhaka, Nov 16 (bdnews24.com)—Grameenphone shares debuted on the country's twin bourses on Monday after a long wait but the prices were not as high as some shareholders had expected them.

Prices of the biggest-ever IPO in Bangladesh's history opened at Tk 160 on the Dhaka Stock Exchange, surged to Tk 195 at one point before ending on Tk 177.30.

Prices of GP shares opened a bit higher on the Chittagong Stock Exchange at Tk 200 but didn't move up any further. It went as low as Tk 162.50 but closed a bit higher at Tk 176.50 with the turnover amounting to Tk 236.861 million.

Meanwhile, the floating caused the prime bourse's key index to cross the 4000 mark to touch a new high.

The DGEN or general index skyrocketed at the opening bell, pushing 720 points up. It closed at 4148.11 points at the end of the day's session, surging 764.87 points or 22.60 percent.

Bourse authorities said the major reason behind the huge hike was GP as it debuted in the market with a huge amount of shares.

A total of 312,501 lots of shares were handed to investors during the IPO with each lot containing 200 shares.

"Out of the day's 764 points, GP accounted for 717 points alone," DSE chief executive Satipati Maitro told the media.

He said the hike was "very much usual" considering the 'circumstances'.

The floating added Tk 23,940 crore to the market capitalisation, added the prime bourse's CEO.

But shareholders were far from impressed.

Khalilur Rahman, who got 600 shares through the IPO, was in the mood to sell some of his holdings on the first day to make quick bucks, but he though better of it.

"I was hoping it would reach at least Tk 300," he told bdnews24.com.

The same happened with many others.

Sharifa Sultana, who works with a private bank, said she was not thinking of selling her 200 shares, for now.

"Everyone was saying that prices would shoot up at least to Tk 400, but it barely reached Tk 200," she told bdnews24.com over phone.

Despite the 'let-down', GP shares worth Tk 1.32 billion changed hands on the DSE, making it the day's turnover leader.

Experts, though, say the market behaved in a matured manner.

"For the first time investors acted sensibly, shareholders did not rush to sell and buyers did not see Tk 200 as a rational price for a GP share," said mutual fund operator Yaweer Sayeed.

"Investment in the true sense happened, this market witnessed trading, not high-stake gambling," he said.

Usually, IPOs are attractive in that they can trade 30 to 40 times the face value on debut.

Sayeed says he finds the price more or less justified given the size of the floating.

"There is no shortage of GP shares, so it may have bashed shareholders' expectations but it [the price] was anticipated," added the top official of asset management firm AIMS of Bangladesh.

Economist Abu Ahmed echoed Sayeed. He said that it was a good sign that the IPO did not follow the usual trend of prices "skyrocketing".

"Quite a number of shareholders are not thinking of just selling it off on the first day as they viewed it as an investment, not a tool to trade," he said.

The huge number of shares in the market also contributed to the price building, added Ahmed, an adviser for market regulator, the Security and Exchange Commission.

Hype for the country's largest mobile-phone operator's floating was at the peak among investors as it attracted subscriptions worth Tk 17.25 billion from over one million prospective investors.

The offer price valued the company at only 3.3 times its 2008 earnings before interest, tax, depreciation and amortisation (EBITDA), which created a buzz among investors.

Norway's telecom giant Telenor owns 62 percent of Grameenphone, launched in 1997, while the local Grameen Telecom owns the rest.