Thread by @BeatTheStreet10

How Promoters acquire stocks for free at the cost of retail investors ?

A thread 🧵 on new way of making free money by promoters by issuing Right Shares at steep discount

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#rightissue #redlfag #corporategovernance

Right issue is generally a fundraising from existing investors by issuing right shares price lower than market price.

This is not like bonus / split where investors don't need to do anything. In right issue if you want to get benefit of acquiring shares at lower price you must need to apply and pay right issue amount.

Everything is fine if shares are issue at reasonable discount to then CMP as in case of Reliance(14%) and Airtel (26%)

BUT INVESTORS CAN LOOSE MONEY SIGNIFICANTLY IF RIGHT ISSUE PRICE IS AT STEEP DISCOUNT HERE IS HOW

Sandur Manganese issued 2 right shares at ₹10 each for every 1 share hold which was worth ₹4000 when right issue was announced. Its almost like a bonus issue.

https://twitter.com/BeatTheStreet10/status/1513253954062147584?t=N1-1TxGSLZOIW0I4eEbc-g&s=19

But
Unlike bonus issue where everybody gets bonus share without action, in case of rights u need to apply.

If u don't, u won't get

Stock price fallen by 66% so those who don't apply, don't get additional 2 shares.

While promoters will subscribe remaining un-subscribed portion.
A smart way by promoters to get more shares at just ₹10

That's 66% of loss for retail investors & 66% gain for promoters

See they made 20 crores very smartly

Also, right issue size is very small (18 crores) against there planned capex of 900 crores.

Telling much about the real objective was not to raise funds but get free shares.

When media questioned about this gimmick the mgt didn't provide any clear answer

https://twitter.com/ZeeBusiness/status/1513445631540441094?t=oo7Nwh8KSA3tHGbaueFZ6g&s=19

This smart trick becoming common as there is no rule by SEBI to decide on the pricing of right issue while in case of other fundraising like QIP & Private Placement there are defined rules for pricing.

Here are more examples

Example 1
Asian Granito right issue priced at 46% discount to then CMP, those who didn't applied lost 56% of their capital

Interestingly this co has history of corporate governance issues and fund diversion too

https://twitter.com/BeatTheStreet10/status/1511951755461857287?t=oo7Nwh8KSA3tHGbaueFZ6g&s=19

Example 2
Suzlon Energy issuing 5 rights issue at 5 Rs per share (45% discount to CMP) for 21 shares held

If investors don't appy they will loose around 8%

Example 3
Heritage Foods right issue at 98% discount to the CMP, very similar to Sandur Manganese case.

If Investor missed applying they will loose 50% of wealth

https://twitter.com/BeatTheStreet10/status/1575912998060707840?t=Ub2qPOO9jb3WOIp2xzfiZQ&s=19

What's the solution then & how to save such huge loss?

#1
Sell your right entitlements (RE) during period of right issue. These are the instruments allotted by co to eligible investors
More⬇️


#2
Apply for right shares but which is cumbersome process

We have been alerting investors in all 4 instances above much before actual capital loss.

But with country where 82000 crores worth of instruments lying unclaimed and many non active investors missed to take action resulting in wealth erosion

Thats how retail investors loss is promoters or institutional investors gain

End of thread

How Promoters are MAKING MONEY from RIGHT ISSUE ?



New way of MAKING MONEY by fooling investors

Sandur Manganese Right Issue Scam
How retail investors are getting fooled by Right Issue ?
What to do?

#scam #fraud #corporategovernance
#promoterfraud

PTC Industries

Another Right Issue Fiasco by issuing stocks at steep discount (at face value)

Promoter stake
B/f right issue issue 67.80%
After right issue 69.40%
Gain to Promoters = Loss to retailers = ₹60 crore

H/t @mukesh634
For more
multipie.co/posts/91686