The SECP has also prepared a comparative analysis of the existing Public Offering Regulations, 2017 and draft amendments in the Public Offering Regulations, 2017 under SRO 1174(I)/2017. The "issuer" in relation to securities, means any person including a company, a special purpose vehicle and a body corporate who has issued or proposes to issue a security and includes an offeror, the SECP said.
The regulations shall apply to a public limited company or body corporate proposing to issue securities to the general public; an offeror who intends to offer securities to the general public and sponsors of the public limited company or body corporate and others. The conditions proposed for issuers for making public offer of securities included that the issuer shall have been in operations for at least three financial years. The Issuer has profitable track record for at least two preceding financial years from its core business activities. Moreover, not less than fifty one percent of the shares of the issuer are held by same persons for at least two preceding financial years and condition is that its book value per share is not less than its face value per share.
According to the draft regulations, eligible investor for the purpose of Book Building included institutional investors and High net worth individuals. "High Net Worth Individuals (HNWI)" means any individual who applies or bid for shares of the value of Rs 2 million or above. HNWI is on the Active Taxpayer List of the Federal Board of Revenue and provides his National Tax Number. HNWI has net worth of at least Rs 5 million as per last year tax return and is registered with the National Clearing Company of Pakistan Limited as person who will be allowed to participate in the Book Building.
A SECP comparison of the existing Public Offering Regulations, 2017 with the draft amendments in the Public Offering Regulations, 2017 revealed that the Consultant to the Issue, Book Runner and Underwriter and their associates shall not publish any research report by whatever name called in respect of the Issuer or Issue from the date of their appointment as Consultant to the Issue, Book Runner and Underwriter to the date of allotment of securities to the general public.
Within 10 days of the close of public subscription period or such shorter period of time as may be specified by the Commission from time to time, the shares shall be allotted and issued against the accepted and successful applications and the subscription money of the unsuccessful applicants shall be unblocked/ refunded, the SECP said.
The comparison of existing and amended regulations further disclosed that the bidders may be allowed to place bids for hundred percent of the offer size and the strike price shall be the price at which the hundred percent of the offer size is subscribed. However, the successful bidders would be allotted and issued only seventy-five percent of the offer size and the remaining twenty five percent would be offered to the retail investors. The bidders shall give an undertaking along with the application that they would subscribe to the unsubscribed shares, if any, by the retail investors and their remaining bid money would remain deposited/ blocked till allotment of unsubscribed shares by the retail investors, if any, to them on pro-rata basis. In case the retail portion is fully subscribed, the bid money shall be immediately refunded or unblocked. In this case, the retail portion may not be underwritten.
The Book Building Portion may comprise of hundred percent of offer size without any offer to retail investor provided that shares offered through 100% book building shall only be traded among Institutional Investors and High net worth individuals on a special board other than the main ready board of the securities exchange. The Commission may impose any other conditions on case to case basis.
The comparative analysis further revealed that Issuer shall decide the Floor Price in consultation with the Consultant to the Issue. The Floor Price and its determination shall be disclosed under a separate section titled as "Valuation Section" in the prospectus containing the justifications given by the Consultant to the Issue in support of the Floor Price set by the Issuer.
(17) The Book Building process shall be considered as cancelled if the total number of bids received is less than forty and Book-Runner shall ensure that subscription money received against the bids accepted shall not be released to the Issuer by the Banker to the Book Building Portion until credit or dispatch of all shares allocated under the retail portion of the issue; and issuance of NOC by the securities exchange in case the company is already listed or formal trading of the company in case of new listing.
Copyright Business Recorder, 2017