Regulator Begins Probe, Seeks Details Of Trade From SEs
On Three Days Since January 29 When Stock Surged 228%
On Three Days Since January 29 When Stock Surged 228%
THE Securities and Exchange Board of India (Sebi) is probing if there was any circular trading in shares of Spice Communications, which had risen sharply of late. A top Sebi official told ET that the market regulator has asked stock exchanges for details of trading in Spice shares in the three sessions since January 29, when the stock surged 228%.
“Prima facie, the trading pattern throws up a lot of questions. The case is high on our priority list,” the official said, while refusing to divulge further details.
The rally in this stock during this period stumped most market watchers, who said the low-free float, provided traders the ammunition to ramp up the stock. Free float means the shareholding of non-promoters, which is supposed to be at least 25% of the total equity, unless in exceptional cases such as public sector companies.
As per shareholding data on BSE, the floating stock in the company is only 80 lakh shares out of the company’s total equity of roughly 6.9-crore shares. This is because Telecom Malaysia India, which is a non-promoter, holds 49%, or 3.38 crore shares, while the existing promoter group, including Idea Cellular, owns 49.9% of the total equity, or 3.44 crore shares.
In the three sessions, when the stock rallied, the average daily volumes were 2.7-crore shares, against a daily aggregate of 7,000 shares in January. Market watchers said the list of shares, where prices have been ramped up in recent months due to “low-free float”, may not be restricted to Spice. Fund managers and brokers said the reason behind such stock price surges, through this method, is the absence of maintaining a free float in spirit, though it is present on paper.
“Today, there are a number of companies with lowfree float that can be manipulated and a lot of such trades are difficult to track down, as the participation of a wider range of people is ensured through spreading of rumours,” said a senior broker familiar with the process.
In another instance of alleged circular trading in the past couple of months, shares of a Mumbai-based realty company were driven up after a sizeable portion of the free-floating stock was cornered by friendly broker circles. The buzz in the investor community is that the move was aimed at countering the attack of bear traders on the stock.
“Prima facie, the trading pattern throws up a lot of questions. The case is high on our priority list,” the official said, while refusing to divulge further details.
The rally in this stock during this period stumped most market watchers, who said the low-free float, provided traders the ammunition to ramp up the stock. Free float means the shareholding of non-promoters, which is supposed to be at least 25% of the total equity, unless in exceptional cases such as public sector companies.
As per shareholding data on BSE, the floating stock in the company is only 80 lakh shares out of the company’s total equity of roughly 6.9-crore shares. This is because Telecom Malaysia India, which is a non-promoter, holds 49%, or 3.38 crore shares, while the existing promoter group, including Idea Cellular, owns 49.9% of the total equity, or 3.44 crore shares.
In the three sessions, when the stock rallied, the average daily volumes were 2.7-crore shares, against a daily aggregate of 7,000 shares in January. Market watchers said the list of shares, where prices have been ramped up in recent months due to “low-free float”, may not be restricted to Spice. Fund managers and brokers said the reason behind such stock price surges, through this method, is the absence of maintaining a free float in spirit, though it is present on paper.
“Today, there are a number of companies with lowfree float that can be manipulated and a lot of such trades are difficult to track down, as the participation of a wider range of people is ensured through spreading of rumours,” said a senior broker familiar with the process.
In another instance of alleged circular trading in the past couple of months, shares of a Mumbai-based realty company were driven up after a sizeable portion of the free-floating stock was cornered by friendly broker circles. The buzz in the investor community is that the move was aimed at countering the attack of bear traders on the stock.
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