To the utter amazement of the entire market, the stock of the broking firm was rigged up non-stop to Rs225 from Rs91, once again making a mockery of regulators, raters, and the entire market system
Stockbrokers may be cutting branches and staff but the stock of broking company Inventure made a debut today that had all the hallmarks of a red-hot chip. Last month, amid deep general gloom and a virtually dead IPO (initial public offering) market, Inventure defied sceptics to make an issue at a princely price of Rs117. Market watchers wondered whether the stock would find takers. Not only was the stock subscribed, but today it opened at the issue price. In line with a weak market, the stock fell to Rs91 and it is then that speculators stepped in. The stock jumped from Rs91 and rose non-stop all the way to Rs225, up by a huge 92%, even as the Sensex was down by 250 points. The stock closed slightly below the high of the day. Stunningly, on its debut, Inventure was the highest-traded share in the market today. Trading volume was a hige 5.87 crore shares, 60% more than the second-highest traded stock Lanco Infratech Limited.
All this would leave a casual market watchers stupefied. Of course, a Moneylife reader would know that the IPO market can be easily manipulated. We had written earlier on how a cabal of Mumbai and Gujarat operators can ensure the full subscription and subsequent price-rigging of any scrip-irrespective of the fundamentals- right the under the nose of the Securities and Exchange Board of India (SEBI) and the two "national" exchanges, the Bombay Stock Exchange and the National Stock Exchange.
Fitch /ICRA had assigned an IPO 'Grade 2' to Inventure's IPO. According to these rating agencies, the company has 'Below Average Fundamentals'. Both rating agencies assign IPO grading on a scale of 5 to 1, with 'Grade 5' indicating 'Strong Fundamentals' and Grade 1 indicating 'Poor Fundamentals.'
The issue has received bids for more than 3.2 crore equity shares against issue size of 70 lakh shares. Non-institutional and retail investors subscribed over 9.49 times and 8.66 times, respectively.
The company intends to spend the issue money for investment in its subsidiary, Inventure Finance Private Limited and long term working capital.
A broking firm coming up with an IPO during a time when other broking firms are cutting jobs due to stiff competition was indeed surprising, to say the least. We now know why.
You may also want to read:
1) IPOs: Manipulation rules
2) What ails the Indian IPO market-I?
3) What ails the Indian IPO Market?-II
Inside story of the National Stock Exchange’s amazing success, leading to hubris, regulatory capture and algo scam
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Maybe the shorts got squeezed badly.
Trading interest in newly listed stocks is very high. Day traders short such stocks in large quantities and often get trapped because of the small free float.