Decoding the inefficiency of Yes Bank FPO
Have you ever wondered, T+2 day concept making you profits
or saving money? Well, not joking at all! Trust me; next time when you trade
into the stock markets, you’d look at this concept like a game changer.
“T” being the transaction date, the abbreviation “T+2”
refers to the settlement date of security that occurs on a transaction date (T)
plus 2 trading days. All stocks are currently settled on T+2 basis. For
example, if one sells shares on Monday, the shares will actually be
deducted/debited from his demat account on Wednesday.
Remember Yes Bank FPO?
In July 2020, Yes Bank announced an FPO to raise INR 15,000
crore from the market.
In a follow-on public offer (FPO), an already listed company issues fresh shares to new investors or existing shareholders. Companies take the FPO route after they have been through the IPO process.
Key data for Yes Bank FPO
FPO Price band – INR 12-13
Open - Wednesday, July 15, 2020
Close – Friday, July 17, 2020
Allotment - Wednesday, July 22, 2020
IPO Listing - Monday, July 27, 2020
Any immature trader or beginner who applied for the FPO
for the purpose of short term listing gain and who was allotted the shares would
wait till 27th July, Monday for the listing to happen and then sell
the allotted FPO shares. Would you believe if I tell you that the shares could
have been sold prior to the listing date. (i.e. 27th July, Monday)
Here’s the hack, if you recollect the T+2 settlement process you might want to sell the shares on Thursday (23rd July) itself so that settlement (debit of shares from buyers demat account to credit of shares in sellers demat account) happens on plus 2 trading days i.e. Monday (27th July) which also is the listing day.
On Thursday (23rd July) Yes Bank hits a lower
circuit of 20% and its price fell from INR 18.25 to 14.6
Another way this can be proved is via the volume traded. The volume traded on Thursday, 23rd July seems to have a spike of nearly 10X than the volume traded on Wednesday, 22nd July) (from 45,01,592 to 4,10,66,562) or any day prior. Why a sudden spike in volume and decline in price on Thursday (23rd July)? Well, don’t you think FPO shares allotted were already sold on Thursday?
So next time when you go for an FPO, you might want to
consider this analysis.
The above analysis indicates an inefficient FPO process.
Do you think authorities should intervene and take
appropriate action?
Happy trading and investing !
Disclaimer
- We cannot use the same for right/bonus/split shares as investors are compelled to hold the stock until one day prior to ex-date.
Also, in case of OFS, listing happens immediately on the next day of allotment which debars us to use this concept.
- Some brokers do not allow to sell shares unless
delivery taken.
- The above analysis my personal opinion and is only for
educational purpose. Kindly consult your financial advisor before making any
decision.
Source for price and volume data - https://in.finance.yahoo.com/quote/YESBANK.BO/history?period1=1594339200&period2=1596153600&interval=1d&filter=history&frequency=1d&includeAdjustedClose=true
Good Insights 👌 Thanks for sharing.
ReplyDeletethank you :)
DeleteThanks for sharing this detailed analysis !
ReplyDeleteglad you liked it !
DeleteIs it necessary that after listing
ReplyDeleteshare price will reduce in case of ofs? 🤔
In case of ofs listing happens next day after allotment then yes bank was an exception?
Do brokers like zerodha or motilal oswal allow to sell?
Hi Piyush, no it’s not necessary that the share price will reduce .. but recently in many cases it has for a short period of time .. yes bank wasn’t an ofs it was an fpo .. if you read the disclaimer I did mention that some brokers don’t allow you to sell those share unless you took a delivery for the same - for the fpo scenario - zero adha didn’t allow not sure about Motilal Oswal.
Delete