Regulations
SEBI refuses to take note of price manipulation in Transgene Biotek – Part II

Did Transgene Biotek insiders use structured GDRs as an end game through price manipulation and motivated announcements? We will never know because SEBI refuses to investigate

On Monday, Moneylife pointed out, several shareholders of Hyderabad-based Transgene Biotek Ltd are crying foul () over the alleged misuse of global depository receipts (GDRs)—a financial instrument used to raise capital overseas, and several “well-timed” announcements by the company. However, market regulator Securities and Exchange Board of India (SEBI) is to yet even acknowledge several complaints filed by these shareholders.
 

Fall in promoters’ stake
 

The shareholding pattern of Transgene between June 2012 and September 2012 quarters reveal ‘precise’ share transactions between ‘related parties’. During these two quarters, custodian shareholding decreased to 39% from 73.44%, a difference of 34.44%. However, during the same period, public shareholding, including foreign institutional investors (FIIs), domestic institutional investors (DIIs) and non-institutions, increased significantly to 51.22% from 16.78% in June 2012, again a difference of 34.44%. So while custodian stakeholders were selling Transgene shares, the ‘public’ was buying exactly the same quantity.
 

 Share Holding Pattern

Jun - 2012

Sep - 2012

Dec - 2013

Promoter and Promoter Group

9.78%

9.78%

21.68%

Indian Promoters

9.78%

9.78%

21.68%

Foreign Promoters

--

--

--

Public (A+B+C)

16.78%

51.22%

70.04%

A) Foreign Institutional Investors (FII)

1.86%

12.83%

--

B) Domestic Institutional Investors (DII)

--

--

--

C) Non Institutions

14.92%

38.39%

70.04%

Custodians

73.44%

39.00%

8.28%

Total

6.58 crore

6.58 crore

7.57 crore

 

Move forward to December 2013, and one can see the exit of FII and substantial stake sell by custodians. At the same time, public shareholding or stake hold by non-institutional investors increased to 70.04% at the end of December 2013 quarter, as per the data from BSE. Even, promoters seem to have increased their stake to 21.68% during the December 2013 quarter from less than 10% in September 2012.
 

The delisting ‘game’
 

Another interesting part is promoter or promoter group held 9.8% stake during September 2012 and yet citing lower share price tried to delist Transgene Biotek from stock exchanges. On 4 September 2012, Transgene board announced its decision to delist its shares. Three days later, it announced delisting price of over Rs25 per share as against the prevailing price of only Rs10.36 per share.
 

Shareholders allege that the company had deliberately announced its delisting at a price 2.5 times more than its prevailing share prices for manipulation. The company apparently sent postal ballots for getting approval from shareholders for delisting. However, there was no response from shareholders, the company said. The question here is after all, why will shareholders disapprove such a “generous” proposal? According to shareholders, either they received the postal ballots just one day prior to the deadline or never received any such thing.
 

One such shareholder in his complaint to SEBI has asked many questions on Transgene’s GDR issue as well as its price manipulative intentions behind delisting announcement. The shareholder in his complaint said, “We (shareholders) believe that the promoters did not have any intention of delisting the company in which they only hold 9.8% shares. If they were serious about their holding in the company, they would have increased their stake through creeping acquisition. If their co-investors were serious about taking a strategic stake in the company, they would have bought out the GDRs outstanding or made an open offer to buy out from public without the ‘delisting’ clause. The structured GDR is normally used as an end game by promoters, who hardly have any holding in the listed entity and are looking forward to milk whatever remains of their company and their reputation in the market place. The modus operandi is similar and operations are through a small clutch of entities which your intelligence wing can find out just by going through the bulk deals done in the small/ mid cap companies with low promoter holding which have also issued a GDR despite their poor financial performance.”
 

The promoter was holding 9.78% in company during September 2012 quarter, when it announced delisting at floor price of Rs25 per equity share.
 

Another investor in his complaint to the market regulator said, “We don't expect that SEBI, which has advanced monitoring and tracking mechanism, to miss such startling white collar crimes being done on investors. Since your systems haven't thrown up these irregularities, we (shareholders) are pointing it out. Please act now - no point ‘bolting the stable door after the horse is stolen’ and he further requested SEBI to investigate in this matter and turn a blind eye!”
 

The shareholding of promoters in the Transgene Biotek was just 9.77% during December 2012 and FII’s holding was 14.26%. As on December 2013, promoters’ shareholding increased to 21.68% and company now doesn’t have any FII holdings. It has declared losses too. During December 2013, the company made loss of Rs66.45 lakh, its sales stood at Rs24.58 lakh.
 

Although the shareholders are raising the GDR and share price manipulation issue of Transgene Biotek, SEBI, the market regulator, till date has not paid any heed to the complaints. This is surprising, as the same SEBI has put in place an Integrated Market Surveillance System (IMSS) to monitor market activities and had used this facility to curtail suspicious trading activities.
 

During September 2011, SEBI, the market regulator, restrained KII, a sub-account of Credo Capital Plc, from dealing with securities in the domestic market in the wake of its alleged involvement in manipulating GDRs.
 

SEBI had in 2009-10 received alerts regarding large scale off-market transactions in its IMSS system in shares of IKF Technologies, Cat Technologies, Avon Corporation, Asahi Infrastructure and K Sera Sera.
 

The regulator had prima facie found that KII among a few other entities was cancelling GDRs of companies and converting them into normal shares for sale in the Indian securities market, to a few selected counterparties.
 

Transgene Biotek closed Tuesday 3.5% down at Rs3.34 on BSE, while the 30-share Sensex ended the day marginally lower at 21,845.
 

You may also want to read…
 

SEBI refuses to take note of price manipulation in Transgene Biotek – Part I

 

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COMMENTS

sathyacumaran

3 years ago

sathyacumaran
Its common that sebi nor nse nor bse would take any steps to price manipulation because its the employees of sebi nse bse who instigate the directors quota of share to be manipulated by the brokers of their notice as nominated by sebi bse nse for which the brokers give the percentage to officials of sebi bse nse this going on for good olden days and our stock market would never improve and an stage would come when all people come to know about the maladministration of indian capital market they would desist from ivnesting in stock market as most of the funds in the stock market is funds of politicians and blackmoney holders and hawla traders where their money could be legalised even those funds which they say that comes from FII from maurties and maladives are not FII's own fund but the blackmoney of politician and industrialist go to maurities or maldaives and then renenter the india in form FII and as such our surmise no FII are interested in investing in india they knew about indian administration and how they loot is know so no investiment is made is our surmise

Bitcoin fallout: Mt Gox files for US bankruptcy protection

Besides protection of its assets, Mt Gox has requested the suspension of actions in the US that jeopardise its efforts to restructure abroad

Troubled Bitcoin exchange Mt Gox has filed for protection under US bankruptcy law, 10 days after doing the same in Japan after a huge loss of the digital currency, a court document showed.

 

The Japanese Exchange is now protected temporarily under Chapter 15 of US bankruptcy law for foreign firms.

 

A bankruptcy court in Dallas, Texas accepted the request and will make a definitive ruling in April, the document said.

 

Chapter 15 protects assets in the US of foreign firms facing insolvency procedures in their home countries.

 

Besides protection of its assets, the exchange has requested the suspension of actions in the US that jeopardise its efforts to restructure abroad, it said in its court filing.

 

Mt Gox faces a class action lawsuit filed 27th February in Illinois by an American named Gregory Greene. He cited deceitful and illegal actions by MtGox, according to a court document.

 

“With respect to the Chapter 15 bankruptcy proceedings, today was a big victory for Mt Gox’s victims. Mt Gox tried to have all US proceedings ‘stayed’ or frozen while it goes at its own pace in the Japanese bankruptcy,” Greene’s attorney Steven Woodrow said in an email to AFP.

 

“We are working with attorneys from around the globe who are planning on filing additional cases in the near future.”

 

Mt Gox Bitcoin exchange filed for bankruptcy on 28th February in Japan, CEO Mark Karpeles saying it had lost nearly half a billion dollars’ worth of the digital currency in a possible theft.

 

The company’s lawyer said 750,000 Bitcoins belonging to customers had gone, along with Mt Gox’s own store of the currency, which she said was around 100,000 units.

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