Sebi against promoters giving IPO statements

Sebi against promoters giving IPO statements
Rajesh Aabraham

NEW DELHI, DECEMBER 13: The Securities and Exchange Board of India (SEBI) is considering imposing a ban on promoters making public statements about companies during flotation of their public issues on the grounds that such comments might influence investors. Market regulator is considering a proposal to check companies from making price-sensitive statements, which are not mentioned in the prospectus, while the issue is open for subscription, top SEBI sources said.

The move follows a controversy on a recent initial public offer (IPO) of a software company, where the promoters were alleged to have made "price-sensitive statements" while the book-building on the issue was on.Pricing of shares would be determined through demand and supply of shares in a book-building offer while the premium is fixed in advance on a normal public issue.

Sources said in both the book-building and the normal public issue, making price-sensitive statements, which are not mentioned in the offer document would have a bearing on thepricing as well as the investor interest on the issue. The statements could be from a new business bagged, winning of a new contract or other price-sensitive matters, the SEBI sources added. SEBI sources said in the United States, Securities Exchange Commission has banned companies from public statements for a period of 90 days after the public offer is open for subscription.

It is likely that the Indian regulator stipulates a similar time-frame before making public comments. A merchant banker involved with the recent book-building issue of the software firm said that they had mentioned in the offer document about the bid made by the firm for some contracts. "We felt the need to inform the investors that the company has won a contract as it would have a bearing on its balance-sheet for the year," an official with Kotak Mahindra said.

However, SEBI sources said that since these information was not mentioned in the offer documents, it would have been advisable that the promoters waited for some time afterthe shares were listed before coming out with such statements. In US, the companies, in fact, have to wait for more than two months before making any price-sensitive information. SEBI said they will come out with proper regulations on this regard only after clearing many grey areas.