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Real Life Example of Stock Manipulation playing out in Indian Capital Markets – Aster Silicates

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An Analysis of the Aster Silicates IPO has revealed it to be a highly overpriced stock offering probably being valued at twice its fair valuation.However the stock gained 69% on its listing day closing at a stock price of Rs 199 ( offer price of Rs 118).This made me write that Aster Silicates may be a case of Pump and Dump.This form of stock price manipulation is defined by wikipedia as

Pump and dump” is a form of microcap stock fraud that involves artificially inflating the price of an owned stock through false and misleading positive statements, in order to sell the cheaply purchased stock at a higher price. Once the operators of the scheme “dump” their overvalued shares, the price falls and investors lose their money. Stocks that are the subject of pump-and-dump schemes are sometimes called “chop stocks”.

Pump and Dump playing out in Aster Silicates

Though it is not exactly a case of stock price manipulation like Pump and Dump it has many of the same features.It is a microcap stock with only $12 million being sold to the public making it easily susceptible to manipulation because of its small float size.Its fundamentals could not in any way justify Rs 199 as even at Rs 118 it looked twice overvalued to me.But the stock kept climbing without any news probably sucking in naive investors out to gamble on the “greater fool” theory until the greatest fools were left holding out the can.The stock has now started falling like a rock as is the case with “pump and dump” with the stock falling by a massive 50% in the 4 days after rising by 100% in the first 2 days of listing.The company’s promoters and the bankers (Saffron Capital) should be investigated on the strange price movement and if found guilty,given a sufficiently strong penalty that should deter the future promoters from playing the stock market like a toy.However the stock market regulator has been tardy in doing so and the primary Indian stock market continues to be flooded by a wave of low quality junk offerings.Here is the NSE data on the stock since its listing on the July 28,2010 and yesterday.

Data for ASTERSILI – ALL from 21-07-2010 to 04-08-2010
SymbolSeriesDatePrev CloseOpen PriceHigh PriceLow PriceLast PriceClose PriceAverage
Price
Total Traded
Quantity
Turnover
in Lacs
ASTERSILIEQ28-Jul-2010118.00128.05241.90123.40214.00205.55163.245946931897078.25
ASTERSILIEQ29-Jul-2010205.55209.80246.70191.00237.95245.35215.682754285359403.63
ASTERSILIEQ30-Jul-2010245.35236.00258.00196.30196.30196.30229.591615189837083.62
ASTERSILIEQ02-Aug-2010196.30190.00190.00157.05157.05157.05157.3666900105.27
ASTERSILIEQ03-Aug-2010157.05130.55154.70125.65125.65125.65131.85820389410816.79
ASTERSILIEQ04-Aug-2010125.65113.35122.80113.10113.10113.10116.0922120572567.92
Download file in csv format
PG

Sneha Shah

I am Sneha, the Editor-in-chief for the Blog. We would be glad to receive suggestions, inputs & comments on GWI from you guys to keep it going! You can contact me for consultancy/trade inquires by writing an email to greensneha@yahoo.in or call me on +913340606492.

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