A stock issued at Tk 10 per share opens for trading at Tk 163. That is not a typo — it is the arithmetic behind a 1,531% first-day return, the single highest listing-day gain recorded on the Dhaka Stock Exchange between 2007 and 2016. And it is not even the most remarkable part of the data. The most remarkable part is that this outcome was not unusual. It was barely an outlier.
Four separate academic studies spanning three decades of DSE listings arrive at the same conclusion: Bangladesh produces the highest average IPO first-day returns of any stock market researchers have measured. The numbers are so extreme they sound fabricated — 116% average returns in the 1990s, 156% in the early 2000s, 264% from 2003 to 2013, and 284% from 2007 to 2016. But they are real, they are documented, and they tell a story about structural market mechanics that every investor applying for an IPO needs to understand before assuming the odds are in their favour.
The Numbers That Make Global Markets Look Modest
Between 2007 and 2016, Khan and Chowdhury studied 100 fixed-price IPOs on the DSE. The average first-day return was 284%. The market-adjusted return — stripping out broader index movement — was 266%. Even the worst-performing IPO in their dataset lost only 0.50% on listing day.
Put that in global context. During the same general era, US IPOs averaged 18.8% first-day returns. India’s BSE produced 7.19%. Pakistan’s Karachi Stock Exchange managed 35.66%. Even China’s notoriously underpriced A-share market — long considered the global extreme — averaged 178% during its peak period. The DSE exceeded them all by a margin that is not close.
The consistency across studies is what makes dismissal difficult. Islam’s 1999 study found 116% average returns across 84 IPOs in the 1990s. A decade-spanning 2010 study of 117 companies documented 156% average underpricing with 87% of IPOs trading above issue price. By 2014, Islam’s analysis of 105 IPOs showed 95.25% were underpriced — meaning only one in twenty IPOs traded below its issue price on listing day. The pattern did not emerge once. It repeated across every sample period researchers examined.
Why a Tk 10 Share Can Open at Tk 100
The explanation is mechanical, not magical. Under BSEC’s Public Issue Rules, fixed-price IPOs — which constitute the majority of DSE listings — are issued at face value, typically Tk 10 per share. No premium is allowed under the fixed-price method. When a company with a net asset value of Tk 83 per share lists at Tk 10, the first-day return is not a measure of investor enthusiasm. It is a measure of the gap between regulatory pricing and economic reality.
This is why oversubscription rates are the single strongest predictor of listing-day returns in every regression model researchers have tested. Higher oversubscription signals greater demand chasing the same artificially constrained supply. The 2009-2010 bull market pushed this dynamic to its extreme — average first-day returns hit 458% in 2009 and an astonishing 559% in 2010, the year before the market crashed. Even after the crash, 2012 still produced an average of 256%, though the range widened violently: from -0.50% to 1,531% in a single year.
Market conditions amplify or compress the effect, but they do not create it. The pricing rules do.
The Catch Nobody Mentions at the Tea Stall
Here is where the 284% average becomes misleading. With oversubscription ratios routinely exceeding 10x — sometimes 50x or higher — an investor applying for Tk 10,000 worth of IPO shares may receive only Tk 200 to Tk 500 in actual allotment under the DSE’s pro-rata electronic system introduced in April 2021. A 284% return on a Tk 500 allotment is Tk 1,420. Satisfying, perhaps. Life-changing, no.
The old lottery-based system was even more binary — most applicants received nothing, a few received full allotments and captured the entire gain. Pro-rata allotment democratised access but diluted individual returns proportionally. The aggregate statistic has not changed. The individual investor’s experience has.
And then there is the question nobody asking about first-day returns wants to hear: what happens on day two? Studies and market data consistently document that many DSE IPOs decline sharply after listing. The long-term price performance of IPO stocks in Bangladesh has been poor, with book-building IPOs in particular experiencing significant post-listing underperformance. A 284% first-day gain that erodes to a 40% gain within three months — or turns negative within a year — changes the calculus entirely for anyone not selling on day one.
What the Data Actually Tells You
The historical record is unambiguous on one point: your odds of a positive first-day return on a DSE IPO have been overwhelmingly favourable. Ninety-five out of every hundred IPOs in the 2003-2013 sample closed above their issue price on listing day. Even during the post-crash years, the worst outcomes were near-zero, not catastrophic.
But the record is equally clear on another point that is less comfortable. The IPO pipeline has thinned dramatically — from dozens of listings annually during the boom years to barely a handful in recent years. The quality of issuers has shifted. And the regulatory environment continues to evolve, with BSEC’s draft 2025 rules proposing stricter controls on how IPO proceeds can be used.
The 284% average is real. It is also a rearview mirror statistic built on a pricing mechanism that systematically undervalues new issues at the point of sale. Whether the next IPO you apply for delivers that kind of return depends on factors the average cannot capture — the company’s fundamentals, the market’s mood, the oversubscription ratio, and most critically, whether you plan to sell on day one or hold through whatever comes after. The historical data can tell you what happened. It cannot tell you what to do with it.
Disclaimer: This article is for educational purposes only and does not constitute investment advice. IPO investments carry risk, including the possibility of loss. Past performance does not guarantee future returns. Consult a licensed financial adviser before making investment decisions.