Stock market investors fall prey to the tips given on social media platforms in WhatsApp groups or by YouTubers. SEBI’s warning can help them to fall under trap before investing in any stock.
Stock Market Investment: Capital market regulator Sebi on Wednesday issued an advisory and warned investors against blindly investing in securities listed in the SME segment, especially based on random tips received from others or from social media platforms. SEBI’s warning has come after there is a significant increase in the number of SME issues in the country and investors are showing more interest in the segment.
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“Sebi urges investors to be careful and watchful of the aforesaid patterns and exercise caution while investing in such securities. Further, investors are advised to not rely on unverified social media posts and not to invest based on tips/rumours,” the statement noted.
Save Yourself From Trap
Sebi, in a statement, said it has come to its notice that post-listing, some of the SME companies or their promoters have been making public announcements that create a positive picture of their operations. Such announcements are followed by various corporate actions like bonus issues, stock splits and preferential allotments.
The actions create a positive sentiment amongst investors, which induces them to purchase such securities. Simultaneously, this also presents an easy opportunity to the promoters to offload their holdings in such companies at elevated prices.
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Key Things To Know Before Buying Any Shares
- During the last decade, more than Rs 14,000 crore has been raised through the SME platform. Out of which, around Rs 6,000 crore were raised only in FY24 itself.
- However it has been found that some of the SME companies and/or their promoters “have been resorting to certain means that project an unrealistic picture of their operations” after getting listed on stock exchange.
- “Such companies/promoters have been seen to make public announcements that create a positive picture of their operations,” the regulator said.
- “These announcements are typically followed up with various corporate actions such as bonus issues, stock splits, preferential allotments, etc,” added the regulator and stated that such actions create a positive sentiment amongst investors & they tend to purchase such securities, said Sebi.
- “Simultaneously, this also presents an easy opportunity to the promoters to offload their holdings in such companies at elevated prices,” the advisory said.
- “It can be seen that the modus-operandi of these entities follows a pattern that is by and large similar to what has been mentioned above,” Sebi noted.
- In addition to the mainboard IPO platform, a separate, dedicated platform for the SME segment was operationalised on the exchanges in 2012. This platform serves as an alternative source of raising funds for emerging businesses, Sebi mentioned.
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(Disclaimer: The information provided in this article is for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.)
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