SEBI Comes To Rescue Of Punters In “Rakesh Jhunjhunwala Surana Solar Scam”
SEBI is hot on the heels of the operators who engineered the alleged “Rakesh Jhunjhunwala Surana Solar Scam”. As an interim measure, stock exchanges have been directed not to make any payout for the transactions effected in the scrip
The “Rakesh Jhunjhunwala Surana Solar Scam” will go down in history as one of the simplest scams enacted. An operator bought a chunk of shares of Surana Solar Ltd, a little micro-cap, in the name of “Rakesh Jhunjhunwala”, the Badshah of Dalal Street. As soon as the news was made public, there was frenzy amongst the punters to grab the stock. This sent the stock price surging to an all-time high of Rs. 63. At this stage, the operator dumped his holding of the stock, leading to abnormally high volumes on the exchanges. Later, when news leaked that the “Rakesh Jhunjhunwala” who had bought the stock in the first place is not the Badshah of Dalal Street but a namesake, the stock price plunged to a low of Rs. 32.The result is that punters who dived into the stock in the belief that the Badshah had bought the stock are facing colossal losses.
Now to the good fortune of the punters, SEBI and the stock exchange authorities are investigating the alleged scam.
The BSE has issued a circular dated 12th June 2015 stating that SEBI vide its email dated June 11, 2015 has directed the Exchanges to withhold pay-out in the scrip of Surana Solar Ltd. (Scrip code 533298) for June 10, 2015 and June 11, 2015, till further notice. This was followed by another circular of the BSE dated 12th June 2015 directing its members not to effect any payout to their clients (both funds and securities) for the trading done in Surana Solar on June 10, 2015 and June 11, 2015.
Now, we have to see whether there is in fact a namesake called “Rakesh Jhunjhunwala” who bought the Surana Solar stock or even the name is bogus. If SEBI finds the transactions to be bogus, it could nullify all the transactions, resulting in massive relief to the punters.
Surana Solar shares jumped 18% after it was reported that ‘Rakesh Jhunjhunwala’ purchased 250,000 odd shares. And then it crashed to its lower circuit next day Retail investors often fall for stock tips or like to take cues from iconic investors like Rakesh Jhunjhunwala. While tracking ace investors may have its own share of risk, acting on information without checking its authenticity can be even worse as we have witnessed recently. Shares of Surana Solar purchased by namesake investor led to high volatility in the scrip. The day after the news of the purchase, the stock went up 18%, before closing at its lower circuit as the true identity of the investor was revealed.
On Tuesday, 9 June 2015, several news reports like this one here spread that “Rakesh Jhunjhunwala” bought over 250 thousand shares of Surana Solar at Rs53.74 each. Unfortunately, it was not confirmed at that time whether it was the ace investor himself. As it soon turned out, it was a namesake investor based in Kolkata. The stock was up about 9.1% for most part of the day on 10 June 2015, before turning 20%, hitting its lower circuit, soon after the real identity of the investor was revealed. By the end of the trading, 58 lakh Surana Solar shares had changed hands on the NSE, compared with a daily average of just over 1.41 lakh shares last week. On 11 June 2015, the stock hit its lower circuit once again and closed at Rs35.80, down 20%. This was 43% down from its peak of Rs63.10 on 10 June 2015. Was the intention to mislead and was it a case of a deliberate pump and dump of the stock? Surana Solar is an India-based solar company which is engaged in manufacturing solar energy systems with the focus on solar photovoltaic (SPV) modules. As it was later revealed, a Kolkata-based client of Rajkot-based Sun Flower Broking, Rakesh Jhunjhunwala, had purchased the shares. It looked like this was planned, as on 8 June 2015 too, the namesake investor had bought 250,000 shares, but squared off on the same day. This did not seem to get any attention, but when the long position was taken on 9 June, that was when the other investors caught on. Was the intention to make the stock price to surge so that he could dump a large quantity on the hapless punters. Whether the namesake investor exited or not and at what price remains a mystery. Will the regulator investigate?
Surana Solar shares jumped as much as 17.4 per cent in early trade on Wednesday after data from the National Stock Exchange showed that Rakesh Jhunjhunwala had bought 2.56 lakh shares or 0.5 per cent stake in the Hyderabad-based company on Tuesday.
Surana solar showing 9% uptick .. RJ pick yesterday .. — Teen Do Paanch (@TeenDoPaanch) June 10, 2015
It appears that nobody wanted to miss out on a stock that Rakesh Jhunjhunwala had invested in, and everybody from traders to analysts and even journalists assumed that the investment was done by Rakesh Jhunjhunwala, the billionaire investor widely followed for his multi-bagger ideas.
Surana Solar management started getting calls from across the country as analysts sought more clarity about the little-known company.
The buying momentum in Surana Solar shares, however, came off post noon and the stock hit a lower circuit minutes before the scheduled stoppage of trade yesterday.
Surana Solar shares ended 13.55 per cent lower at Rs 45.95, off the day’s high of Rs 62.40. By the end of the trading, 58 lakh Surana Solar shares had changed hands, compared with a daily average of just over 1.41 lakh shares last week.
Yesterday rakesh Jhunjhunwala buys some Surana solar. Today stock goes up 10% then drops to 20%,lower circuit. Whoops. — Deepak Shenoy (@deepakshenoy) June 10, 2015
Haha. There is another guy named rakesh Jhunjhunwala it seems. Ooh. — Deepak Shenoy (@deepakshenoy) June 10, 2015
“Should SEBI investigate how this fake RJ bought Surana Solar -Who lent him 2 buy this ‘gem’? This is his maiden pick – recently opened account,” tweeted independent analyst Ambareesh Baliga.
Company caught in crossfire:
Surana Solar shares were locked down in lower circuit at Rs 36.80 on Thursday. Other group companies were also caught in the crossfire; Surana Ventures crashed 20 per cent today, while Surana Telecom and Power traded 3 per cent lower.
Narendra Surana, chairman of Surana Solar told NDTV that his company got involved in an “unnecessary” controversy. Surana Solar‘s performance continues as before and there is absolutely no reason for such kind of selling, he added.
“It looks like someone with the same name as the big investor took advantage and made a killing, but the name of the company has been spoiled. They (authorities) should look into this, but what can they do? People will fall for it…eventually the company will lose out,” Mr Surana said.
Since this confusion, the stock ‘ has fallen 42% in four trading session. “Sebi vide its email dated June 11, 2015 has directed the exchanges to withhold payout in the scrip of Sura na Solar for June 10, 2015 and June 11 till further notice,” BSE said in a notice posted on its website.”In order to comply with the Sebi direction in the matter, trading members are requested to note that for the trading done in Surana Solar on June 10, 2015 and June 11, they shall not effect any payout to their clients (both funds and securities) arising out of their inter-client positions at their end as well till further notice,” it said. As on March 31, promoters held 75% stake in the company .
Traders, who prefer to piggyback investor Rakesh Jhunjhunwala rather than identify their own stock winners to earn a quick buck, were in a rude shock on Wednesday. Shares of Chennai-based Surana Solar surged as much as 19% during the early trading hours on Wednesday after a disclosure showed ‘Rakesh Jhunjhunwala’ bought 2.56 lakh shares of the company at an average price of Rs 53.74 per share in a bulk deal. However, in a couple of hours of trading, the stock plunged after the market realised that the billionaire investor had not invested in the company and an operator had used his name to spark interest in the stock. The stock crashed 31% from the day’s high. On the BSE, about 17.6 lakh Surana shares were traded against the daily average of 54,000 shares in the last two weeks. Many investors who bought the stock at higher levels were forced to square off at a sharp loss.