SEC tells IPOs ‘go 50:50’

In a move that is expected to revitalise average and new investors, the Securities and Exchange Commission (SEC) yesterday directed a new rule for basis of broader allocation in IPOs from 15 March.

The SEC said it has observed that the recent Initial Public Offerings (IPOs) were heavily oversubscribed due to investors using the bank guarantee option to submit IPO applications for a very large quantity of shares.

“This has resulted in a majority of retail investors being allotted a small portion of the shares applied and has not created a level playing field in the Primary Market thereby hindering the process of broad basing share ownership in the country,” it added. Following a consultative process with the Colombo Stock Exchange (CSE), Colombo Stock Brokers Association (CSBA) and IPO Managers, the SEC said it decided to facilitate a fair allocation of shares to retail individual investors and licensed Sri Lankan unit trusts during IPOs. 

With this backdrop the Commission approved the following rules effective from 15 March 2011.

i   (a)  A minimum of 40% of the offered shares (for a particular share class) in a public offer to be initially made available for allotment to retail individual investors. A ‘retail individual investor’ shall be defined as an individual investor who applies (for a particular share class) for up to a maximum of 3,000 shares or for a value of not more than Rs. 100,000 whichever is higher.

 (b)   Applicants submitting applications under other investor categories shall not make applications   under the retail individual investor category.

ii   (a)  A minimum of 10% of the offered shares (for a particular share class) in a public offer to be initially made available for allotment to Sri Lankan growth or balanced unit trust funds licensed by the Securities and Exchange Commission of Sri Lanka (“SEC”) comprising of not less than 500 unit holders resident in Sri Lanka making up of at least 50% of the fund (“unit trust investor category”). This rule will be subject to compliance with the SEC Directive made under Circular No. 01/2009 dated 7 January 2009.

(b)   In the event of an under-subscription in the unit trust investor category and an over-subscription in other investor categories, the oversubscription in the retail individual investor category shall be given first priority in allotment of under-subscribed shares.

(c) In the event of an under-subscription in the retail individual investor category and an over-subscription in other investor categories, over-subscription in the unit trust investor category shall be given first priority in the allotment of under-subscribed shares.

Bears take a break as Bourse’s value up Rs. 14 b

Recently activated bears took an apparent break yesterday as the stock market saw its value gain by Rs. 14 billion with return of bargain hunters and rebound in investor sentiments.

The All Share Index (ASI) gained by 0.55% whilst market capitalisation rose by Rs. 14 billion as buying returned with Rs. 1.7 billion turnover. Until yesterday’s gain the Bourse had lost Rs. 152 billion in value since 14 February all time high.

“The indices ended on a positive note due to renewed buying across the board amid moderate activity levels,” John Keells Stock Brokers said.

NDB Stockbrokers said the indices gained slightly after ASPI shed 321 points and MPI lost 182 points over the last 3 days.

“While undervalued stocks do exist, the rise of certain illiquid stocks seems to have overheated the overall market,” it added.

Diversified (due to John Keells Holdings and The Colombo Fort Land) and Construction and Engineering (due to Lankem Developments) sectors were the highest contributors to the market turnover while both sector indices increased by 0.85% and 1.08% respectively.

Lankem Developments continued to attract investors making the highest contribution to the market. The share price increased by Rs. 16.40 (34.82%) and closed at Rs. 64.

The Colombo Fort Land & Building witnessed selling despite a subdivision announcement. Guardian capital and Bukit Darah continued to lose the rapid gains made in the recent past.

Distilleries announced an interim dividend of Rs. 0.50 per share while Haycarb also announced an interim dividend of Rs. 3.00 per share.

Lankem Dev. in price band

THE Securities and Exchange Commission (SEC) yesterday imposed a 10% price band on Lankem Developments (LDEV) with effect from 11 March 2011 to 24 March 2011 (both days inclusive).

The stock yesterday topped the gainers list up 34.8% or Rs. 16.40 to close at Rs. 63.50 after hitting an intra-day high of Rs. 68.60. Over 3.6 million shares of the Company trade for Rs. 217 million generating the highest turnover.

On Wednesday it rose by Rs. 1.80 after a 15 for one Rights Issue was announced to raise Rs. 2.5 billion. The move was to finance the purchase  a 62% stake in Agarapathana Plantations.  Last week Lankem Developments rose by Rs. 1.60 to close at Rs. 48.70 and yestardy’s closing reflect an increase of Rs. 14.80.

Meanwhile the Colombo Fort Land & Buliding Company (CFLB) announced a 01 to 05 Sub Division of its voting shares (Subject to Approval). Consequently, the number of voting shares would increase from 36.0mn to 180.0mn.