Written by The Banking Post
The securities regulator has restored the IPO share allotment lottery, scrapping the pro-rata system that had been in place since 2020, in a move aimed at improving fairness and rebuilding investor confidence.
The change comes under the revised Bangladesh Securities and Exchange Commission (Public Offer of Equity Securities) Rules, 2025, which took effect on December 30 through a gazette notification.
At a press briefing on Wednesday, BSEC spokesperson Md Abul Kalam said the decision followed overwhelming feedback from general investors during consultations on the draft rules. Most respondents argued that the pro-rata method favoured large investors and left small applicants with negligible or zero allocations.
Out of 200 opinions submitted, 171 supported the return of the lottery system, he said, adding that dissatisfaction with the earlier method had also contributed to a gradual decline in beneficiary owner accounts.
Under the revised rules, the lottery system will apply to general investors and non-resident Bangladeshis for both fixed-price and book-building IPOs.
In fixed-price offerings, 60 per cent of shares will be allocated to general investors and 10 per cent to NRBs through lottery. The remaining 30 per cent will go to eligible investors, mutual funds and company employees on a pro-rata basis.
For book-building issues, 35 per cent of shares will be reserved for general investors and 7 per cent for NRBs under the lottery system, while the rest will be distributed among eligible investors, mutual funds, high-net-worth individuals and employees on a pro-rata basis.
The regulator said the new rules were framed after considering views from all stakeholder groups, with an emphasis on fair valuation of IPO shares. Any attempt to manipulate prices during the bidding process will attract strict penalties.
Addressing concerns from businesses, the revised framework allows companies to use IPO or rights issue proceeds to repay bank loans taken for expansion or modernisation. However, repayment of non-performing loans using public issue funds will remain prohibited. Auditor reports confirming proper use of loan funds will be mandatory for regulatory approval.
The rules also strengthen due diligence requirements. Issue managers, auditors and credit rating agencies will be required to conduct on-site inspections, while stock exchanges will have the authority to visit factories and offices and examine relevant records.
New capital thresholds have also been introduced. Companies must have a minimum paid-up capital of Tk 300 million to launch an IPO under either method. Post-IPO paid-up capital must be at least Tk 500 million, with a minimum public offer of 10 per cent.
For fixed-price issues, post-IPO paid-up capital will be capped at Tk 1.25 billion, while no upper limit will apply to book-building IPOs. Large companies with post-IPO capital exceeding Tk 5 billion may offer less than 10 per cent to the public.
The regulator expressed confidence that the revised rules would improve transparency, protect retail investors and strengthen the overall IPO process.
