Direct listing without an IPO: BSEC publishes gazette of new listing rules for large companies

The Bangladesh Securities and Exchange Commission (BSEC) has published a gazette creating an opportunity for good, eligible large public and private companies to list directly on the stock market without an initial public offering (IPO). The rules, titled the Bangladesh Securities and Exchange Commission (Direct Listing of Securities on the Stock Exchange) Rules, 2026, bring a formal framework for direct listing into force.

The rules were issued on October 13. They were published in an additional issue of the Bangladesh Gazette on Sunday (October 18), and took effect immediately upon gazette publication.

Earlier, at the BSEC's 1027th commission meeting on September 1, chaired by Chairman Masud Khan, a decision was taken to approve the draft. The commission then took written opinions on the draft from general investors, market intermediaries and other stakeholders. Based on those opinions, the new rules were finalised and published in gazette form.

The new rules keep open direct listing for government- and foreign-owned institutions, large industrial groups, banks, financial institutions, insurance companies and other institutions meeting specified qualifications. To qualify, however, a company must have operated for at least five years, earned profits from its core business in the previous two financial years, and shown positive cash flow from operating activities in the most recent financial year, among other conditions.

Under the eligibility conditions, an applicant for direct listing must be a public limited company with annual turnover or sales revenue of at least Tk 1,000 crore. Companies wholly or at least 51 percent foreign-owned, and companies wholly or at least 51 percent government-owned, will also get the opportunity. Companies in which the government holds at least 10 percent direct or indirect ownership will also come within eligibility.

For banks, financial institutions and insurance companies, net assets must be at least Tk 500 crore according to the latest audited financial statements. In addition, any other company designated by the BSEC may also be given the opportunity of direct listing.

The rules place special emphasis on share price determination. A company must set a reference price for its shares in consultation with a merchant banker, using at least two valuation methods — one absolute valuation method and one relative valuation method. The methods must be chosen considering the nature and sector of the company's business, and the rationale for that choice must be disclosed.

After the reference price is set, the minimum asking price for the share sale must be kept at least 25 percent below that price. In other words, if a company's reference price is set at Tk 100, the minimum asking price must be Tk 75 or less. This is not, however, the share's final market price — the market price will be determined on the first day's price discovery phase on the basis of investors' bids. At the same time, at least 10 percent of the company's shares must be released to the market through sales by existing shareholders.

Under the rules, after listing, sponsors and directors must collectively hold at least 30 percent of the company's paid-up capital, and that ownership must be maintained thereafter. On the other hand, no single individual or institutional investor may buy more than 1 percent of the total shares designated for sale through direct listing. At least 10 percent of the shares designated for sale must be sold within 30 trading days from the first trading day.

Special rules apply to the first day's trading. There will be a two-hour price discovery phase for determining the share price — during this time investors may place buy orders, but sellers may not place any sell orders, and no buy order below the minimum asking price will be accepted. After the price discovery phase, sellers may place sell orders at the best price available in the market. No circuit breaker will apply to the share on the first day. In the first two trading days, no single order to buy fewer than 100 or more than 1,000 shares will be accepted either.

Further restrictions have been kept for investor protection. From the first day of direct listing for one year, the sellers concerned may not buy shares of that company. Restrictions will also apply for a specified period to selling more than 50 percent of the shares held at the time of listing.

As for the application process, a fee of Tk 100,000 must be paid to apply for listing. Within 15 working days of receiving an application, the stock exchange must notify any deficiencies, and after all conditions are met, listing approval must be given within 15 working days. The approved information memorandum must be published at least 10 days before trading begins, so that investors can review the company's financial and other information before deciding.

Through the new rules, regulations 8 to 13 on direct listing in the 2015 listing regulations of the Dhaka Stock Exchange and Chittagong Stock Exchange have been repealed. Direct listing will therefore now follow the conditions of the new rules — and market participants will be watching how much response this new route for large, eligible companies to enter the market actually generates.