Sebi suspects share price foul play through open offers
The steps being mulled by the Securities and Exchange Board of India (Sebi) in this regard include tougher norms for withdrawal of offers at a later stage and even the delinking of offered price from the prevailing market rates, a senior official said.
In the event of entire takeovers or any significant purchase of shares by promoters or other large investors in listed companies, the regulations make it mandatory for the acquirer to make an open offer for purchase of additional shares from the public investors.
However, the open offer price is determined on the basis of average prevailing market price of the concerned company, while a spike is generally noticed in the share price in the run-up to the announcement of such offers and even after that in hopes that offer might be revised upward by the acquirer to get the desired amount of shares.
Sebi is of the view that promoters and other entities at times tend to use these open offers to jack up the share price and withdraw the same at a later stage, while citing
insufficient response as an excuse, the official said.
At the same time, there is also a concern that open offers might trigger an unnatural spike in the share price of target companies by vested interests, especially in cases of
takeovers as information flow starts much before
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