Jobaaj Stories
After a terrible week at the bourses, the Adani Group has announced that it will be aborting its massive Follow-on Public Offer (FPO) and returning all funds invested so far, claiming that going through with the FPO would be 'morally incorrect'.
About the FPO, it was India's largest FPO (so far) with an issue size of Rs 20,000 crores! The company was planning to mobilize the funds raised to fund its ambitious capex plans and repay the debts outstanding for itself and its subsidiaries.
The anchor book, which is an indicator of investors' interest in the company, was fully subscribed as said investors invested around Rs 6,000 crores in the book!
However, troubles began when Hindenburg Research published its short report on the Adani group, wherein it blatantly accused the group of stock market manipulation, financial fraud, and of 'pulling the largest con in corporate history'.
The report sent all Adani stocks spiraling down and investor sentiment wasn't particularly favorable. The first day of the FPO depicted the shaky investor faith in the company as the entire FPO saw a subscription of only 1%!!
The second day was marginally better as the subscription was at 3%. As of now, the shares had fallen below the FPO price of Rs 3,276 per share and wiped out over $50 billion in wealth for Gautam Adani.
However, things took a turn for the better when Abu Dhabi-based International Holding Company (IHC) announced a $400 million investment into the FPO, subscribing to 16% of the FPO by itself! As such, investor sentiment picked up once again as the FPO was successfully subscribed with a 112% subscription!!
However, shares that were being traded on the bourses saw massive selling pressures as the Group lost $92 billion in less than 7 trading sessions!!! Adani Enterprises, particularly, lost 28.20% of its value in a day, falling down to Rs 2,135.35 per share. Meaning, FPO subscribers were buying the new shares at a premium of 53.42%!!!!!
Finally, the company announced its decision to call off the FPO, stating that continuing with the same would not be 'morally correct'. Pursuant to the same, the Group announced that it was working with its Book Running Lead Managers to refund all investments and release the block on funds.
Although the decision to abort its FPO might have been taken while keeping the investors in mind, it does not inspire confidence in existing investors.
Article by Aman Agarwal.
