Speaking to The Express Tribune on Thursday, the spokesperson for the Securities and Exchange Commission of Pakistan (SECP) confirmed that it has sought a report from the KSE about the alleged manipulation in the book building of Saif Power, which was held earlier this week.
The KSE-led inquiry will follow complaints by at least two brokerage houses and one investment bank that the book-building process was marred by ‘massive manipulation’ and procedural irregularities on part of the book-runner.
Arif Habib Limited, a Karachi-based brokerage, serves as the book-runner to the offer, which consists of 48.3 million ordinary shares, representing 12.5% of Saif Power’s paid-up capital.
A little over 36.2 million shares – 75% of the offer size – were obtainable through the book-building process to institutional and high net worth individuals on Tuesday while the rest of the offer size will be offered to the general public later on.
Unlike past offers for companies’ sale of shares that carried only a floor price, the book-building process for Saif Power involved a price band ranging from Rs18 per share to Rs30 per share. In other words, bidders were bound to place bids at less than Rs30 per share.
Speaking on the condition of anonymity, an investment banker who participated in the bidding process said the whole exercise took place ‘in the absence of any independent checks and control’.
“Instead of the pro-rata basis, the book building exercise was carried out on a first-come-first-served basis, which left room for procedural irregularities and manipulation,” he said.
However, it should be noted that SECP guidelines for the listing of companies allow this mechanism for book building.
He said bidders had to line up outside the book-runner’s office as early in the morning as possible to get a ‘token’ in time. As per the listing regulations, the book-runner is responsible for collecting bid applications and putting serial numbers, date and time on each bidding form at the time of their collection.
Insisting that the book-runner failed to observe impartiality while receiving the bids, a broker said it manipulated the process to the advantage of its own clients.
“A broker by definition is loyal to his clients. The conflict of interest, particularly when there are few checks and balances, is too apparent,” he said while requesting not to be named. “The book-runner accommodated only those bidders to whom it wanted to give favours.”
A spokesperson for Arif Habib Limited said that Saif Power’s book building was conducted in a proper and transparent manner that was in accordance with the rules set out by the regulators.
“Arif Habib Limited followed the bidding procedure under the book-building process outlined in the offer for sale document of Saif Power Limited, which was approved by the KSE and SECP,” the spokesperson said.
It should be noted that one director of Saif Power, Osman Saifullah Khan, also serves on the policy board of the SECP.
Responding to a question about a possible conflict of interest, the SECP spokesman said it “may not be relevant” because investors’ complaints are about alleged wrongdoing by Arif Habib Limited, and not Saif Power Limited.
Published in The Express Tribune, October 3rd, 2014.
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I happens to be one of the investor which experience this entire manipulation, as I submitted my bid application form at Arif Habib Center (Karachi) at 09:10 AM. I place my bid at maximum limit price but to no avail. Still my bid was unsuccessful.
How funny I believe shares should not offered to the general public, this is only a formality rather it should be distributed among brokers.
probe should be investigated and conflict of interest was also present as ahl clients could also participate when i talked to one of ahl employee he said my client half of shares ahl clients were given preference and another of my information is that big guns were offered to submit a day before bidding proceess on 29th so they could be given favour so check and balance or control authority was present to witness this and other thing when investors gave their application they were given receiving after 1-1.5 hours
Arif Habib is another feather in the cap of our beloved country. When he came to stock exchange he was on a bicycle and eventually ended up with billions. One could hardly forget how many stock exchange scam this gentleman has been involved in.
@ SECP spokesman said it “may not be relevant” because investors’ complaints are about alleged wrongdoing by Arif Habib Limited, and not Saif Power Limited. . It may be relevant especially if the wrongdoing in the book building process affects the strike price. Since the main purpose of book building is finding a strike price therefore wrongdoing in the process shall affect the price.