Claris Lifescience to sell off at twice Market Cap Valuation ?

Where Monies are involved there will be Stink!

This Generalisation fits Stock Markets wonderfully well !

I believe ,and have quoted often and even set a MBA Post Graduate Final Examination question to discuss with real illustrations that ‘India & Insider Trading are Inseparable’…and I daresay,deliberately kept so !

Let’s take this morning’s Headline on Page 1 in the Mumbai Edition of India’s leading and influential pink paper

Cadila Healthcare to acquire Claris Lifesciences for Rs 3400 crore  

Such Acquisition News has been floated by the same reporter of the same newspaper just a few months ago on February 12,2015

Big pharma eyes takeover of Claris’ injectables business for Rs 2500-Rs 3000 crore

When BSE sought Clarification from Claris Lifesciences today,May 21,2015 and even on February 12,2015 here are the two replies from the Company

Clarification to BSE  by Claris today, May 21,2015

“As a company policy we do not comments on any market rumour and speculations. The Company continues to explore and evaluate inorganic and strategic opportunities in various forms from time to time; however nothing definitive in this regard has happened. We will notify the exchanges upon occurrence of any definitive developments in this regard.

Also as a company we inform stock exchange for any such information which is required under listing agreement as well as clause 36 of the listing agreement.”

Clarification to BSE  by Claris on Feb 12,2015

“we state that at present we are not negotiating the sale of stake in the injectables business, and the Board of Directors of the Company has neither considered nor taken any decision in this regard.

For the growth of the business, Company continues to explore and evaluate inorganic and strategic opportunities in various forms from time to time, however nothing definitive in this regard has happened. We will duly notify the exchanges upon the occurrence of any definitive developments in this regard.”

Relevant Share Price Movements in February 2015  May 21,2015 reveal the huge impact of such News by a leading pink paper

February 12,2015 ~ A Day Before,On & a Day After 

Opening February 2015 at Rs 175 and moving to just over Rs 200 levels by February 11,2015 before hitting and closing on upper circuit of 20% at Rs 248 on February 12,2015 on impact of the Newspaper Story with heavy abnormal volumes and  despite Company Clarification (see above) that was posted on BSE Website at 2.42 pm during market hours that they are not negotiating any such sale the Share Price yet hits up 18% at Rs 293 the next day,February 13,2015 with nearly double the Feb 12,2015 volumes !

The Share Price then went on to hit a 52 Week High of Rs 358 just last month in April 2015 before reacting in the market’s general correction to a range of Rs 250 to Rs 280.

Today May 21,2015 ~ A Day Before and Today

Yesterday Share Price  closed at Rs 279  with Market Cap under Rs 1800 crs and today after the paper ran a Front Page Headline Story as above it recorded a morning intra day high of  over 18 % @ Rs 331 and despite Company clarification as above that there was nothing definitive in this regard closed up 11 % at Rs 310 levels  giving a Market Cap of nearly Rs 2000 crs 

Compare the two Company Clarifications of Feb 12, 2015 and today May 21, 2015 on similar nature news printed by the Newspaper….In Feb the Company categorically denied such negotiations were taking place.Today that para has been removed and merely the para that was also included in Feb has been reproduced verbatim today in May !….along with a new one that states it always informs BSE any information required as per listing agreement and clause 36 of it !

Are we to assume now that Negotiations are on for such a Deal though nothing definitive has been reached?…Of course the Newspaper Report mentions that Claris has appointed end January 2015 the Investment Bankers Barclays & Jefferies to initiate such a Sale Process.BSE Website does not show any such notification disclosure by the Company to the Exchange  

And BSE will as it always does accept such clarifications without further following up and thus  letting the company and insiders off  !

What could be a Solution to provide a level playing field

The Key  lies in the Valuation sought  and obtained by the Seller

Here’s my Contention and Suggestion for the  Exchanges & SEBI to plug Insider Trading Windows in such situations

As soon as Company first decides to explore Sale of Full or Part Business,even before it’s Board Meeting to discuss the same, it must  be made mandatory for it to Disclose and make Public the Sought Valuation upfront to remove any advantage to Insiders who are privy to such sensitive information.The Company must also notify the Exchanges on the Board Meeting being held for the same and what was decided at such a meeting.It must also inform that it seeks to appoint Investment Bankers  for such a Sale Process and announce when it does  

This will also take care of a situation where the Company can be pulled up strongly when Media etc publicly communicate such a Deal by the Company being  in the pipeline and subsequent  Clarification from the Company to the Exchanges on the lines above that they have nothing to report on such a deal and where later they do strike a Deal !   

The Sale may or may not materialise for various reasons.However it would be a level playing field for all who take the scrip risk on the Disclosed Valuation Sought by the Company when Exploring a Sale

Insiders would say ” The Fun’s Gone !”….But  Spare a Thought for the Non Insiders who play the scrip on such News !

Otherwise this sickly situation  will continue of Insiders ruling the roost at the cost of Non Insider ‘Bakras’….for if they make money through an unfair advantage then ‘Bakras’  have to lose it !

However my sense is that the Nexus is simply too Powerful to make  our  Democracy a level playing field…be it in Business or Stock Markets or even in Sports and other areas

Open to  hearing  Views and Perspectives on this even if  you are not on my wavelength on this

Cheers !