Tradable shares in an enterprise are a great gift of capitalism. By design, they stake money pooled from a wide range of sources not only jointly but extra boldly for larger returns from the business, with the shareholders’ liability capped at the amount invested in their piece of ownership . Being openly listed for purchase, they give everyone access to profit slice-ups and play a role in guiding the fortunes of the stock markets. By the breadth of their occupation, they widen control and spread oversight, guidance and rewards, justifying the concept’s privileges, explaining its success and linking capitalism to democracy. However, if the equity of a company is very close, most of those bets are off. A boss-driven business under the guise of a joint-stock corporation is likely to stumble, while sparsely traded stocks fail to elicit market views (let alone signals). Such stock shares are also a delight for the puppeteers; Because they require very little buying or selling to make a yo-yo, they are the site of price-rigging scams large and small. Both variants were made easier by the easy money of the Covid relief and are now testing India’s regulatory system as policy reversals expose such games. While the stock puppet was spotted in January by Adani as material for larger allegations, its scandalous value this month buzzed with reports of cinema celebrities being hauled in as part of a smaller bust-up .
On March 2, the Securities and Exchange Board of India (SEBI) banned over 30 small players from the market for the pump-and-dump game they played with two micro-cap stocks, Sadhna Broadcast Ltd and Sharpline Broadcast Ltd and punished. As alleged, both were pumped up by manipulators last year and dumped after crowds were drawn in by the glitz of their rise. Market killings are often carried out in this way and such scams have been rampant, but this scam has indications that it was staged as a scripted project of showbiz-as-media . It is said that hundreds of millions were budgeted for advisory channels on YouTube with names like ‘Moneywise’ and ‘Profit Maker’ to attract a large audience – much of it through paid traffic boosters – to spread the word about fake news. The sneaky bits have to be fed and the demand for the chosen stocks has to be fueled. As ironic as it may sound, one of the lies planted to drive up the price of Sadhna, which became rampant last summer, was that it would be taken over by Adani. Since this roaring empire was then seen in search of the media, it might even have seemed plausible. Following Hindenburg’s January 24 report on the group, however, whether Adani rigged its shares has been a big question. Their availability has long been suspected of being below India’s 25% minimum free-float norm. And since they’ve been little traded, not only have their value been volatile, they’ve also been equally easy to inflate – as is allegedly done covertly by entities controlled by Gautam Adani’s elder brother. Responding to the petitions, the top court on Thursday set up an expert panel to study the recent volatility in the market and examine whether there is any regulatory failure that may call for reforms, even as it asked Sebi to probe asked whether the free-float rule had been violated. Related party transactions were not disclosed and if any stock manipulation occurred.
The country’s equity boom has benefited us well, with millions participating in money-making, but the vitality of financial intermediation through stock markets will depend on ownership distribution. For our economy to grow efficiently, it is best that we allow the markets to allocate resources as best they can. It is much more centralized today.
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