Well, some are talking about it privately but here is one very serious allegation against the company that may shake you.
Yes, the Securities Board of Nepal (SEBON) suspended the Rs. 3,00,65,76,450 IPO.
And the reason cited was failure of the rating agency: Care Ratings Nepal Ltd. to respond to the clarifications sought by the securities regulator.
I covered the possible conflict of interest situation and what may have led to the rating agency not responding to the regulator. Here is the link: Kailash Panday on LinkedIn: #nepal #ipo #investors #conflictofinterest
The interesting aspect of this IPO was that despite being oversubscribed the company was looking to extend the IPO Application Date!
This is where it all got fishy.
And now the new allegations that the company manipulated the IPO are OUT, though not widely reported.
So how did the company do that and why the extension despite the over subscription?
Here is what the company seems to have done and please note these are allegations which needs serious investigation.
And this may be one of the largest fraud in the history of Nepal’s share market.
So the company set up some dummy companies and made IPO applications (larger than for amount of Rs. 10 lakh).
While for application for less than Rs. 10 lakhs, you need to have that amount in your bank account and is immediately blocked once you submit the IPO application.
But for larger amounts, a bank cheque is submitted and hence at the time of application, the amount cannot be verified.
So, without having any amount in the bank account, these companies/persons may have made dummy application for large amount of shares.
And why the extension?
Well, seeing the IPO being oversubscribed, the anxious investors would definitely make an application primarily due to #FOMO and if the IPO wasn’t suspended, then may be they would have enough application to cover the initial dummy applications that inflated the demand for the shares.
And just may be the company could have pulled off the greatest con on the general investors!
Mind you, the IPO was oversubscribed 3.27 times despite the shares reserved for the project affected locals, employees of the company and Nepali citizens in foreign employment were not fully subscribed.
If reports are to be believed then half of the IPO applications were suspicious or even fraudulent.
Where does this go from here? Why did the company dare to do all this? Did they have the gut feeling that they could get away with all this?
What’s your take?