Last minute huge selloff sees share drop 1/3rd -WHODUNNIT

Birla Pacific Medspa Limited which had issued shares at par and raised Rs 6517.50 lacs listed on the BSE today. The share opened or listed at Rs 10.10 and made a high of Rs 30.70. The low was the open of Rs 10.10 and the closing price was Rs 25.35. The share saw plenty of drama during the closing minutes.

The company had issued shares in a price band of Rs 10-11 and the issue was open between the 20th and 23rd of June. The issue was subscribed an overall 1.18 times with the HNI category undersubscribed at a mere 0.17 times. The retail portion was subscribed 1.82 times and there was lot of grey market activity in the share.

The share is traded on the BSE alone and the traded volume on the first day was a staggering 1358.59 lac shares. This is 2.09 times the IPO size of 651.75 lac shares. The delivery volume was 311.08 lac shares or 22.9% of the traded volume. The delivery as a percentage of the IPO size was 47.73%. The weighted average of the day’s trade was Rs 18.15. The weighted average close of the day was Rs 25.35, which means a gain of Rs 15.35 or effectively 153.50%.

The share began trading on a very sedate note and for the first two hours of trade was range bound between Rs 12-13. Thereafter the stock made a dip and started rising and by 1.15 pm had made the high of the day at Rs 30.70. From there on the share fluctuated between Rs 25-28 and again at around 3.25pm or a mere 5 minutes before the markets were to close, the share touched the Rs 30 level and crashed all the way to Rs 20. This remained the last traded price and because the closing price is computed on the weightedaverage close of the last 15 minutes trade, the same came to Rs 25.35. If one looks at the above price chart one would be able to see two huge green lines towards the end of the chart which shows the volume in the last couple of minutes.

The important question is who did it? Who was able to sell such large quantity of a share in a last few minutes of trade? What was his interest? The answers are in the pattern of trading and I believe this is a fit case of investigation by the regulators. Issues which do not have the requisite fundamentals get subscribed. There is huge volume which is created in them in the first few days and then the share starts crashing. At the end of it all the shareholders are the sufferers and these people have bought the share at prices which are substantially higher than the issue price. There are umpteen examples of shares which have risen 40% to 100% from the issue price and are now trading at less than half and one third the issue price.

To refresh the memory of readers some recent examples are Acropetal which issued shares at Rs 90, made a high of Rs 156 and is now trading at Rs 17.05. Yet another example is Sanghvi Forging which issued shares at Rs 85, made a high of Rs 144.90 and is now trading at Rs 42.55. A third example is that of Timbor Home which issued shares at Rs 63, made a high of Rs 109 on the listing day and closed at Rs 45.20 on the 7th of July. This was at the down circuit and this was the fifth consecutive down circuit in the share.

As far as the record books are concerned, Birla Pacific Medspa Limited had a great debut on the BSE when on the opening day the share closed with gains of a staggering 153.50%. In reality, it is one more case where the “friendly intermediary” has made his killing at the cost of thousands of investors and hammered one more nail in the coffin of capital markets. If this continues so rampantly, the day would not be far away when people would shun the primary market and merchant bankers would be unable to answer questions as to why investors do not apply in new issues.

The time to act is now.