CSE may tighten lock-in rules for preferential IPO share allotments
The Colombo Stock Exchange (CSE) is exploring suggestions in tightening lock-in rules for preferential allotments in public listings, officials said.
This came after the Initial Public Offering (IPO) of Capital Alliance Ltd. (CAL) which was oversubscribed on its official opening day on November 25 took some dissension from retailers after the allotments.
The CAL IPO offered 41,177,236 ordinary shares for a 12.5 per cent stake to the public, priced at Rs. 10 per share. After CAL allocated 24 per cent, after IPO’s preferential allotment to employees, the no lock-in element in IPOs suddenly became controversial on social media as the retailers did not get their expected allotments. There were questions on whether IPO’s should have preferential allotments to selected investors. The IPO saw more than 10,000 applications and had 8000 retail applications. The retailers felt cheated that their allotment was overlooked in place of the company employees.
“Now the CSE has mandatory allocations spelled out giving retailers 40 per cent of the shares and 10 per cent is allocated to unit trusts in IPO’s that have raised less than Rs. 3 billion. For the rest of the investors there aren’t any rules,” a CSE official told the Business Times on Friday. He said the market operator has to be balanced when deciding on this. “We have noted some of the suggestions and we are looking at the best option.”
All eyes are on ensuing IPOs and how the shares of those will be allotted, a market analyst noted.
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