The promoters sell their stake at higher prices in the market and the investors are stuck in the worthless stock of those companies. SEBI urges investors to be watchful of such things and advises not to rely on any messages through social media platforms.
According to the data we have witnessed on the internet, there are many SME companies listed this year that were trading below their listing day price even after making a good debut on indices.
As per the latest changes by NSE on SME IPO listing made on 4 July, the listing of SMEs is capped at 90%. We might see some changes in the pattern of the SME Listing from the SEBI’s advisory.
SEBI’s Advisory for Investors:
The Small and Medium Enterprises (SME) platform of the Stock Exchanges was operationalised in the year 2012 to serve as an alternative source of raising funds for emerging businesses. Ever since, there has been an increase in the number of SME issues as also the investor participation in such offerings. During the last decade, more than ₹14,000 Crores has been raised through this platform, of which around ₹6,000 Crores was raised during FY ‘24.
However, it has come to the notice of SEBI that, post listing, some of the SME companies and/or their promoters have been resorting to certain means that project an unrealistic picture of their operations. 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.
The above actions create a positive sentiment amongst investors, which induces them into purchasing such securities. Simultaneously, this also presents an easy opportunity for the promoters to offload their holdings in such companies at elevated prices.
SEBI, in the recent past, has passed Orders against such entities, which are available on the SEBI website. It can be seen that the modus operandi of these entities follows a pattern that is by and large similar to what has been mentioned above.
SEBI urges investors to be careful and watchful of the aforesaid patterns and exercise caution while investing in such securities. Further, investors are advised not to rely on unverified social media posts and not to invest based on tips/rumors.
This advisory is being issued in the interest of investors.
Source: SEBI
