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Did This Real Estate Company Violate Insider Trading Rules?

how companies violate insider trading rules
Did This Real Estate Company Violate Insider Trading Rules?
2 (40%) 1 vote

This real estate company spiked up 100% in a period of 6 months.

Nothing wrong in that, but about 10 months ago it had pledged about 3 crore shares, which were hovering around Rs 15.

That’s a worth of 45 crores. Assuming the financier lent 50%, the company would have gotten a loan of about 22 crores.

On Friday, it revoked the pledge of about 1.57 crore shares, price of which had appreciated to Rs 29-30.

Double.

Here’s the proof:

ansal properties insider deals

The company is Ansal Properties.

Now, I’m not saying this is a violation of insider trading rules.

I’m just saying that the stock has zoomed from 15 to 30 in a span of 4 months (see the image above), at a time when the real estate market was stagnant. Of course, quality real estate stocks like DLF and Godrej Properties appreciated, but definitely not by 100%, and that too in 5 months.

The Ansal properties pledge was revoked as soon as the share doubled and it was reported to the exchange on 7 July 2017.

Though the transaction is legally above board, I do have the following questions:

1. Was the stock price played around with to revoke the pledge?
(know that no loan replacement is necessary to revoke the pledge because the value has appreciated)

2. Half the pledged shares have been released. Will the stock price still be boosted to a point where the pledged loan can be repaid in full by selling a small part of the 3 crore shares? If this theory proves right, we may see Ansal properties cross 50 bucks.

3. If (2) above is proved right, will the management dispose stocks in the open market to repay the loan?

These are all hypothetical questions and I may be wrong. It’s just that this deal has sounded a red alert for me and I figured that I should blog about it.

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