The Securities and Exchange Board of India (Sebi) on Wednesday cautioned investors about a pattern of stock manipulation in the SME (small and medium enterprises) market, where promoters paint “unrealistic picture” of their business to elevate stock prices and offload their stake. The markets regulator urged investors to be careful and watchful of these patterns and exercise caution while investing in such stocks. It further advised investors to not rely on unverified social media posts and not to invest based on tips or rumours. Sebi’s advisory comes amid rising concerns over the quality of issues coming to the SME market and unrelenting interest from individual investors in these issue. “Such companies/promoters have been seen to make public announcements that create a positive picture of their operations. These announcements are typically followed up with various corporate actions such as bonus issues, stock splits, preferential allotments, etc,” Sebi said in a press release. While the market regulator has raised concerns about stock manipulations in the SME segment even earlier, it is for the first time that it has issued a press statement cautioning investors about it. The markets regulator further said these positive announcements created a positive sentiment among investors, inducing them into purchasing these stocks. “Simultaneously, this also presents an easy opportunity to the promoters to offload their holdings in such companies at elevated prices,” Sebi said. Also ReadRIL AGM 2024: Date, Time, Where to watch Reliance Industries 47th Annual General Meeting The regulator said the “modus-operandi of these entities follows a pattern that is by and large similar” to this. The companies listing on SME platforms have given free-wheeling returns with some listing at a premium of 300-400% to their issue price. The mouth-watering returns have led to a surge in demand for these IPO shares, which in turn, has led to significantly high subscription numbers. This week, a company with two automobile showrooms and eight permanent employees received bids worth Rs 5,517 crore for its Rs 12-crore IPO on the BSE SME platform.
