Tuesday, March 29, 2011

Union Bank - first day of share trading - Interesting to note sour grapes act of Sampath Bank

Today was the first day the shares of Union Bank began trading. The Rs25/- shares briefly touched Rs 45/- for a few moments before settling down around Rs38/- Don't forget that the 15,000,000 shares that were offered at Rs25/- were oversubscribed over 250 times, and 99.9% of the applicants only got 100 shares each. Even if you sent in a cheque for Rs1M subscribing for 40,000 shares all you would get is 200 shares, and the balance Rs995K would be returned to you. So to sell your 100 shares and make Rs1,300 is what I would hardly call a killing!!(before brokerage)

What is more perturbing and smacks of sour grapes, and being self destructive was Sampath Bank who announced in the papers today of all days that it intends to sell their stake amounting to 26,338,000 shares amounting to 7.9% of the Bank. Nothing hangs like a cloud over a new issue than this kind of public disclosure.

I am willing to guess that at least Rs5 per share was wiped out of the subscribers first day sales as a result of this announcement. After all 30Million shares changed hands on the first day, double the number of shares issued. This potential sale by Sampath exceeds the new issue by nearly twice as much and therefore can be considered a material disclosure. So technically I cannot fault Sampath for making this disclosure at this stage, if it truly intended to sell its stake now, but I cannot see any earthly reason for them to rush to a sale, where they can choose a more opportune moment at a more favorable price in the future.

In the interest of the Sampath Bank shareholders, to get maximum value out of this sale, I would not have made this announcement, but waited for the prices to settle and find a buyer for this significant stake at a more favorable price through negotiation at some date in the future. This announcement therefore as shown above does not help either of the Bank's shareholders, and more permanently affects the new Union Bank's shareholders who must be frothing mad at this act.

These are the happenings in Serendipity these days!!!! (Union with a higher PE ratio than Sampath is unpalatable to the latter, is that why? how petty can you get?)

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