Tuesday, September 02, 2008

Resurgere surge - stock in play?

Resurgere mines (RESU.BO: Quote, Profile, Research) IPO debut took my breath away.

Coming at a time when bearish overtones rule, the miniscule 4-4.5 million shares offered in this IPO received bids of about 1.2 times. A very lukewarm response. In normal conditions one would call it a “scrape through”. Debut listing price was also at a very marginal premium of Rs.2/- (i.e. Rs 272.05) on the BSE, over its issue price of Rs 270. No marked bidding frenzy was observed when the book was open. QIB had bid for 1.3 times and HNI about 2.4 times. Retail turned their back on it with just 0.4 times. CRISIL had assigned a '1/5' grade to the offering, citing the management's limited track record in the iron ore business and the fact that the company's financial returns are vulnerable to spot price movements of iron ore.

Normally such dubious issues begin to slide post listing or just maintain price levels. But this was not to be. What happened later was astounding.

Within minutes of listing yesterday, the scrip touched a high of Rs 299 and over 3 lakh shares exchanged hands. The share price surge in a weak market at record volumes - 33 million shares on the BSE - raised eyebrows given the low rating and cautious brokerage. It closed at a whopping Rs.524, a premium of about 100% on day 1. Today the scrip rose by another 20% and hit the upper circuit to close at Rs.625.

Clear signs of something-wrong-somewhere. But not enough for SEBI to sit up and take notice. May be, we should wait for a couple years for CBI to ferret out the rot, well after the smarts have pasted it on unsuspecting investors that might get caught in the wild dance...

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