In a major shake up in the capital market, the Securities and Exchange Commission is going to introduce book-building system for initial public offer soon. Book Building – alternative to fixed price system – is basically a capital issuance process used in initial public offer and during the period for which the book for the IPO is open, bids are collected from investors at various prices, which are above or equal to the floor price.

A SEC technical committee consisting representatives from major stakeholders of the capital market is working to expedite the process for the introduction of the book-building system. The commission asked the technical committee to scrutinise ins and outs of the proposed book-building system and place its report to the commission soon.

Different financial institutions and business houses including the Bangladesh Bank, chamber bodies and merchant bankers gave thier inputs in preparing the draft policy guideline. The book-building system would encourage multinational companies to raise capital from the capital market. The multinational companies prefer book-building system as an appropriate policy to ensure proper pricing of their stakes before going public.

Under the proposed book building system, the underwriters will buy all shares to be floated by a business enterprise in the stock markets through competitive bidding. Underwriters will then choose some seller groups or brokers to put up those shares for sale to retail investors. The share issuing companies will get their share prices from the underwriter who will be the highest bidder in the bidding procedure.