What is an IPO?
An IPO is when a company sells its shares to the general public for the first time. Before that it is owned by a handful of people; after the IPO anyone can buy its shares, and they start trading on the stock exchange.
The company raises fresh money this way, and you get a chance to become a part-owner from the start. But when demand is high, applying does not guarantee you get shares, and no one can say in advance whether the price will rise or fall once trading starts.
Say a pharmaceutical company is selling shares in an IPO at, say, Tk 10 each. Maruf applies for Tk 10,000 worth. Far more people apply than there are shares, so Maruf gets none and his money is returned. His friend Sadia does get shares; once trading starts the price rises for a while, then begins to fall. When to sell is now her call.
How it works
A company that wants to raise money prepares a prospectus with an issue manager and seeks BSEC approval. Once approved, applications (subscriptions) are taken for a set period. After shares are allotted, the company lists on the stock exchange and its shares start trading.
There are two ways of setting the price. In the fixed-price method the price is set in advance, usually the Tk 10 face value. In book building, institutional and other eligible investors bid in an auction and a cut-off price is set from those bids; general investors then apply at that price or at whatever discount the rules allow.
Part of the offer is set aside for general investors, part for non-resident Bangladeshis, and the rest for eligible investors, mutual funds and others. If applications exceed the shares on offer (oversubscription), not everyone gets shares; those who miss out get their money back.
At a fixed price of Tk 10, someone applies for Tk 10,000 and is allotted 1,000 shares. If the price is Tk 15 after listing, that is a paper gain of Tk 5,000; at Tk 8, a paper loss of Tk 2,000. If no shares are allotted, the money comes back, but it is tied up while the application is processed. The figures are only examples.
Allocation: lottery or pro-rata
How shares are shared out among general investors when demand is high has changed several times. For a long time there was a lottery: the lucky ones got a full lot, the rest nothing. From around 2020–2021, pro-rata allocation was used, giving every applicant a small number of shares. In January 2026 BSEC brought the lottery back.
Eligibility changes too. For some years, applicants had to hold at least a set value of listed shares in the secondary market on a cut-off date (in 2022 this rose from Tk 20,000 to Tk 50,000). The new public issue rules that took effect at the end of 2025 are reported to have dropped this condition. Check the rules in force before each IPO.
What to look for in the prospectus
- Use of the money
- New capacity and growth, or mainly paying off old loans?
- Earnings history
- A sudden jump in profit just before the IPO can be a reason for caution.
- Price and valuation
- Compare the price with earnings and assets per share, and with listed companies in the same sector.
- Sponsor lock-in
- How long sponsors and directors cannot sell; selling pressure can follow when the lock-in ends.
- Auditor and credit rating
- See whether the auditor’s opinion carries any qualification or warning.
What return to expect
In Bangladesh many IPOs have traded well above the offer price in their early days, so many people see IPOs as a “sure profit”. That early jump is well documented in research. But it does not happen with every IPO, and many shares later fell back to or below the offer price; for example, one share listed at Tk 10 in January 2022 was trading below Tk 10 by that August.
Under a lottery, the chance of getting shares is low; under pro-rata allocation, each person got so few shares that even a gain was small in taka. After listing, the share rises and falls like any other.
Why people choose it
- Fixed-price issues are usually at face value, a relatively low price.
- If you are not allotted shares, your money comes back.
- The prospectus makes detailed company information public.
- You can apply online through your BO account.
Points to weigh
- With high demand you may get no shares, or very few.
- New companies have no long track record, and prospectus figures are hard to verify.
- After listing, the price can fall below the offer price.
- Your money is tied up while the application is processed.
- The rules change often.
Tax
Once listed, shares from an IPO are treated like any other listed share. Dividends and gains on sale are taxed under the same rules as shares (see the shares page).
Under the Income Tax Act 2023, in recent years an individual’s gains from selling listed shares have been tax-free up to Tk 50 lakh a year; the annual Finance Act can change this.
Tax rules can change with each year’s Finance Act. Before a big decision, check the latest rules or speak to a tax adviser.
How to get started
- Open a BO account linked to a bank account in your own name.
- Check approved IPOs and subscription dates on the BSEC and stock exchange websites.
- Read the prospectus, especially the use of funds, earnings history and risk factors.
- Check the eligibility rules and application amount in force, then apply through your broker or online.
- Check the allotment result, and if you get no shares, confirm your money has been refunded.
Check before you start
- Have I read the prospectus myself, or am I applying on others’ word?
- Do I understand what the company will use the money for?
- If the price falls after listing, can I hold on?
- Am I assuming every IPO makes money?
- Do I know the eligibility rules for this IPO?