The punters had a fool-proof method to make money. As soon as they learn that a company is seeking to delist its shares, they pounce on the company and corner all the shares, sending the stock price spiraling up. Then, they force the beleaguered management to shell out the increased stock price, making multi-bagger profits for themselves.
There is a long list of companies that have been a victim of the punters’ avarice. Ricoh India, Fulford, DIC India, Panasonic Applicances are some recent examples. Some companies like Ricoh and DIC were forced to abandon their delisting plans because they could not afford to pay the exorbitant demands of the punters.
Now, in an ironical twist of fate, the punters are at the receiving end and the companies are calling the shots.
The reason is the amendments made by SEBI to the Delisting of Equity Shares Regulations, 2009. To understand the precise implications of these amendments, we have to turn to the expert analysis by E&Y.
What appears to have spooked punters in particular is the requirement by SEBI that atleast 25% of the number of public shareholders (holding shares in dematerialized mode as on date of Board of Directors meeting approving such delisting proposal) should tender their shares. E&Y opined that this requirement of 25% may pose a “significant challenge” in implementing delisting process where large numbers of public shareholders hold nominal shares or significant stake is concentrated in few hands.
Anil Jindal, an expert on the subject of delisting, expressed grave concern that the requirement of 25% shareholders (as against shareholding) will “kill the product”. He argued that SEBI’s objective appeared to be to prevent companies from delisting.
|Loss suffered in delisting offers|
|Delisting candidate||CMP||Loss in 1 month|
*weekly is taken because the offer is less than a month old.
Anil Jindal also pointed out that there is ambiguity on whether the amendments would apply to companies which are already in the midst of a delisting such as Essar Oil, Essar Ports, Essar Shipping, Manjushree Technopack & Panasonic Appliances.
Interestingly, Anil Jindal came out in defense of the punters by arguing that the claim that the punters drove up the prices is not fair. He said that the promoters would accept the price and be willing to pay only if it made commercial sense to them and so there are market forces at play which should not be curbed.
Meanwhile, the punters are hoping that SEBI will relax the 25% shareholders requirement or at least clarify that the amendments will not apply to companies that are in the midst of a delisting.