Friday, June 5, 2015

Punters Cry Foul At Mega Loss In Adani Ent Demerger Fiasco & Petition SEBI For Rescue

Adani Enterprises has always been the punters’ favourite. Given the alleged closeness between its promoter, Billionaire Gautam Adani, and NAMO, any news relating to NAMO sends the stock either plunging or soaring. So, the stock is a favourite hunting ground for punters looking to make a quick buck.
Yesterday, Adani Enterprises was a bit sluggish. It opened at Rs 574 and began to drift. Given that NAMO has been receiving a bit of good press lately, Adani looked good for a couple of bucks. A few sharp punters loaded up on the stock and lay waiting in anticipation.
To the utter shock and disbelief of the punters, the stock price plunged all of a sudden to touch a low of Rs. 116, a whopping loss of 80%.
When the punters came to their senses, they realized that the reason for the plunge in the stock price was because the stock price adjusted for the demerger of the port to Adani Ports & SEZ and the demerger of the power and transmission businesses to Adani Power.
In the normal course of events, this would make no difference because investors in Adnai Enterprises as on the record date would be compensated by shares in Adani Ports & SEZ and Adani Power. The fall in the value of shares of one would be compensated by the rise in the stock price of the other.
Also, in the normal course of events, such a fiasco does not happen. The normal practice amongst stock exchanges in cases of demerger etc is to allow trading only at the price adjusted for the demerger or to have a special session for discovery of the price. There are a number of precedents for this including in the case of the demerger of Reliance Industries into the other Reliance companies.
Now, fortunately for the punters who are caught on the wrong foot, the Investors Grievances Forum (IGF) has come to their rescue. In a strongly worded letter addressed to SEBI, the IGF has alleged that the stock exchanges allowed trading in Adani Enterprises “by brushing aside and throwing all the norms” and in a “most shocking manner”. It is also alleged that the irregularity appears to be “deliberate and mala fide”.
The IGF has claimed that a “large number of gullible innocent investors” … having no knowledge of the “cunning way” in which Exchanges allowed trading of share of Adani Enterprises … have been trapped resulting into losses to them.
It is also stated that “vested interests in Exchanges with connivance of manipulators allowed trading” …. with “mala fide intentions to cause loss to large number of investors”. It is also alleged that there could be “instutionalised scams orchestrated and executed by the unethical highly qualified professionals”.
The IGF has pleaded for a time bound investigation so as to ensure that “the sanctity of the trading platform is always maintained and investors are not put to any loss by discriminatory treatments”.
Surprisingly, the IGF has not claimed that the transactions should be nullified and treated as null and void. It is a principle of contract law that anything done under a mistake is voidable.
Now, we have to see how SEBI and the stock exchanges react to this fiasco and whether the punters are able to get all or any of their losses back.

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