Sebi to look at price gaps before & at IPO

MUMBAI: There have been instances recently where some companies, which were heading for an initial public offer (IPO), placed a large chunk of shares with private investors a few months before it opens for subscription in the market. Then suddenly, at the time of the IPO, these companies priced their shares at a substantial premium to the pre-offer price. Any company planning such a move should now watch out. Sebi is set to ask such companies and their merchant bankers to explain what happened in the intervening months to justify the substantial price differential.
Sebi chairperson Madhabi Puri Buch on Tuesday said companies were free to price their IPOs. But if there is a substantial difference between the prices before and at the time of the IPO, merchant bankers will have to explain the same. In the last one year, such trends were observed in several new age tech companies that went public, and now the prices of those stocks are at a discount to the IPO price.
According to the Sebi chief, such disclosures would be beneficial to both the parties. In case there’s a problem in the company, following which investors allege that they were misled into investing in its shares, then there could be a problem in the transaction. “Full disclosure protects both the discloser and the disclosed. Both parties are protected. And this is the spirit in which we believe in, 100% transparency and disclosure,” Buch said. She was speaking at Ficci‘s annual capital market conference in the city.
The Sebi chairperson also said that from now on, all changes to the regulations would be based on data and urged stakeholders to also depend on data when they approach the regulator with their proposals, suggestions and comments. That way it would be easier for Sebi to take decisions and support the industry, she said.
This would also facilitate an environment of partnership that would help create more wealth for investors and for the country. She also urged stakeholders to be specific and give actionable recommendations for the regulator to consider, rather than sending in suggestions that are generic in nature.

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