The shareholders of Eros International, which includes several distinguished names, are cowering in fear at the savage manner in which their precious wealth has evaporated into thin air in the savage Bear attack that the stock has witnessed over the past few days.
The stock slumped 20% today to rest at Rs. 354. This was on the back of a 17% crash on Friday on the NYSE. The stock had touched a high of Rs. 644 on 20.07.2015. In the three months that have elapsed, the stock has lost about 45%.
Leading the bear attack is a twitter user called “Market Farce” who appears to be a disgruntled employee of the company who is now spilling the beans about the company’s alleged misdemeanors.
“Investing in $EROS – Beware! You’re dealing with serial manipulators! Unbelievable, they thought no one would notice/verify their Reg. Users” Market Farce warned in a chilling tone.
Wells Fargo, a leading firm of analysts, took a cue from this and said that it was “not comfortable” with Eros’ business operations outside India (i.e. in the UAE). This clearly leads credence to the allegations/ suspicions that Eros is cooking the books of account to show fictitious income.
Interestingly, some major shareholders appeared to have smelt a rat and bailed out before the crises broke out.
Indus Fund (Mauritius) which is managed by Indus Capital Advisors is a striking example of this. As of 01.04.2014, Indus held 38,77,769 shares of Eros constituting 4.22% of the equity. By 31.03.2015, Indus reduced its holding to 12,82,839 shares constituting 1.39% of the equity. By 30.06.2015, Indus has disappeared from the list of major shareholders.
Did Indus Capital have an inkling that Eros International would land in trouble over alleged fudged accounts?
However, Eros International is not giving in. It has adopted a belligerent tone and decided to take the battle to the bears’ camp. In a strongly worded statement, Dimple Mehta, Company Secretary, dismissed the fears as being based on “speculative media reports”. She also sought to spook the bears by drawing attention to a few blockbuster movies like the Salman Khan starrer ‘Bajrangi Bhaijaan’ and promising that the Q2FY16 results would be “strong”.
When I last checked, Market Farce was not impressed with Eros’ rebuttal. “$EROS – the art of deception – saying nothing! No clarification on receivables, UAE revenues and ErosNow User count?” he/ she said contemptuously.
— Market Farce (@Market_Farce) October 26, 2015
Now, we have to wait and watch who wins this death match – Eros or the Bears!