The Adani Group FPO is called off as the share prices of the company saw an unprecedented crash following the Hindenburg Research report. Here’s everything you need to know.
Why did Adani Group call off the FPO?
In a regulatory filing on Wednesday, the Adani Group revealed it is canceling its follow-on public offer (FPO) worth Rs 20,000 crore. An FPO or secondary offering is a process where a company listed on stock exchanges issues new shares to both new investors and existing shareholders. The company will refund all proceeds received. The development is following the massive crash in the company’s stocks following the Hindenburg Research report. The report was accusing the group of “brazen stock manipulation and accounting fraud”.
On Tuesday, foreign investors and corporates bailed out the group’s FPO amidst the volatility. However, despite the market prices staying below the issue price, the FPO subscribed 1.12 times on the last day. The qualified institutional buyers (QIBs) subscribed 1.26 times while non-institutional investors (NIIs) accounted for 3.32 times. On the other hand, Foreign institutional investors (FIIs) applied for a total of 1.24 shares totaling Rs 4,127 crores. However, the retail investors’ portion was subscribed by 12 percent i.e., 0.12 times.
Here’s what happened
The meltdown in Adani Group’s bonds and stocks resumed as the company’s shares fell by 28 percent. Around noon IST on Wednesday, Credit Suisse Group stopped accepting the company’s bonds as collateral for its private banking clients. Moreover, as per sources, Credit Suisse’s private banking arm assigned a zero landing value for those notes sold by AG. As per a Bloomberg report, this move signaled that the company’s finances were growing. When a private bank cuts the lending value to zero, clients must top up with cash or other collateral. However, upon failing to do so, their securities are liquidated.
“The subscription for the FPO closed successfully yesterday. Despite the volatility in the stock over the last week, your faith and belief in the Company, its business, and its management have been extremely reassuring and humbling. Thank you,” stated Chairman Gautam Adani. “However, today the market has been unprecedented, and our stock price has fluctuated over the day. Given these extraordinary circumstances, the Company’s board felt that going ahead with the issue will not be morally correct. The interest of the investors is paramount and hence to insulate them from any potential financial losses, the Board has decided not to go ahead with the FPO,” he added.
