SEBI gave notice
If you are also making money from IPOs, this news might be useful for you. In fact, there is a glut of IPOs on the stock market today. Every week 5-6 companies are coming to the IPO market. Due to which now the stock market regulator, the Securities Exchange Board of India, i.e. SEBI itself, has once again warned investors. This time, SEBI has advised people to be careful about oversubscribing new shares.
Market regulator SEBI has warned investors about the increasing number of fraudulent promoters in the MSME sector. SEBI says there are many companies whose promoters exaggerate the growth of the company after listing in order to attract investors and they get caught in this trap. These companies resort to illegal methods to boost the share price in the market and then exit. SEBI has asked investors not to invest their money in the market based on social media posts, tips and rumours. Let us know which IPOs SEBI is concerned about.
6,000 crore rupees raised in one year
In a press release, SEBI said that since the launch of the platform for trading of SME shares in 2012, over Rs 14,000 crore has been raised. But SMEs raised a total of Rs 6,000 crore in FY24 alone. Recently, NSE had tightened the rules for SME IPOs and said that from September 1, only companies with positive free cash flow will be allowed to list on its platform. Free cash flow refers to the cash left after paying all operating and capital expenditures.
This is how companies are trapping us
SEBI has found that after listing, some SMEs or their promoters are using methods to present an unrealistic picture of their operations. SEBI said that such announcements are often followed by various corporate actions like issuance of bonuses, stock splits and preferential allotment. This creates a positive sentiment towards the company among investors, compelling them to buy shares of that company. Moreover, it also provides an easy opportunity to the promoters to sell their stake in such companies at higher prices.
The company with 2 showrooms caused a sensation
Recently, a similar case of listing came to light where the company had planned to raise Rs 12 crore through IPO but on the last day of bidding it was oversubscribed not by 2 or 3 times but by 418 times. There was panic in the market following this news.
Such a frenzy regarding IPOs has rarely been seen before. Like the issue of Resourceful Automobile Company. This company has two bike showrooms in Delhi and only 8 employees are employed in them. To raise money from the market, this company launched its initial public offering (IPO) on August 22, in which investors had invested till August 26. But there seemed to be competition to invest money in this IPO. The IPO size of Resourceful Automobile was Rs 11.99 crore, but till the last day it was oversubscribed by 418 times. The company received bids worth Rs 4,768.88 crore. Of these, bids worth Rs 2,825.11 crore fall under the retail category, while bids worth Rs 1,796.85 crore fall under the other category.
