The Securities Board of Nepal (Sebon) has decided to resume issuance of initial public offerings (IPOs) of Ghorahi Cement, which fell into a controversy due to unfair practice in the subscription process of the primary shares.
Issuing a press statement on Wednesday, the Sebon said it is permitting the Ghorahi Cement to carry forward the IPOs release process, while continuing the investigation process. Showing the cause of a large amount of applicants’ money that has been put on hold due to flaws seen in the subscription process, the regulator of the sector has taken the decision.
On June 15, the cement manufacturer opened 6,911,670 units of shares for the general public at the premium rate of Rs 435 per share. The public issue was supposed to close by June 19. Earlier to this, the company had opened the sale of shares from May 2 to May 16 for project-affected locals and Nepalis working abroad.
However, the Sebon asked the company’s issue managers Himalayan Capital Limited and Nabil Investment Banking Limited to halt the issuance process to the general public citing the case of ‘fake subscription’ on issuing IPOs. The regulator had found the company considering many applicants who were not backed by bank accounts, to apply for the primary shares.
The Sebon has estimated applications for more than 10 million shares as fake subscriptions. The market players are suspected to have gone into malpractice just to show an overwhelming response towards the company’s share.
Following the incident, the regulator asked the banks concerned to freeze the amount that the applicants used in the process to purchase the company’s IPOs. Sebon’s step had invited wide criticism as it had frozen billions of rupees of the investors’ money.
According to the Sebon, around Rs 3.61 billion of the applicants’ money out of the public issuance was put on hold due to its action. A total of Rs 294.67 million collected via issuance of primary shares for the project affected locals and migrant workers has already been transferred in the company’s account.
For the resumption of the public issuance process, the regulator has allowed the applicants that are registered in the C-ASBA system to cancel the subscription or to change the units of IPOs that they have wished to purchase. The applicants will be given a deadline of three days to change their decisions, reads the Sebon’s press release.
The Sebon has slapped a cash fine of Rs 1 million against Market Securities Exchange Pvt Ltd.
The regulator took action against the stock brokerage and wealth management firm on charge of breaching the Money Laundering Prevention Act 2008.
