Clamour Around The OFS of GMM Pfaudler: Is The Market “Crying Foul”?
While the world is coping with a major Black Swan Event in the form of the pandemic, shareholders of GMM Pfaudler Ltd. (GMM) probably believe that they have been faced with another such event.
Seems like an exaggerated claim? On Sept 21, 2020, the promoters of GMM made an unanticipated announcement to make an Offer for Sale (OFS) with a floor price of INR 3,500 v/s the Sept 21 closing price of INR 5,241, a steep 33% discount. This particularly did not go down well with investors who had invested at the highs in Aug, 2020 when the stock traded at valuations of 139X FY20 earnings. The share price had rallied 180% since the beginning of 2020, however, since the announcement of OFS, the share price has spiraled down by ~28%. Adding fuel to this fire were allegations of insider trading. Apparently, positions were taken in the stock lending and borrowing mechanism (SLBM) segment at the time of the announcement. The shareholders have taken to social media to lament the OFS discount as well as begun to question the intentions of the management. Is this resentment warranted or is the market “crying foul” as a consequence of being dispirited by the recent developments and losing sight of the larger picture?