Itâ€™s not new. Our business media is routinely taken for a ride by corrupt businessmen and their PR hatchetmen. However, this case is a class apart.
On December 21, Business Standard carried a news report, which was faithfully â€œfollowed upâ€ by other business newspapers in Mumbai and the rest of the country. The report centred around a certain letter, purportedly written by markets regulator Sebi (Securities and Exchange Board of India). The letter was addressed to Pyramid Saimira, a Chennai-based theatre chain. The letter asked the promoters of the company to make an â€œopen offerâ€ to the shareholders of the company.
As per rules, anyone buying more than 5% stake in a company within a year is expected to make an open offer to its ordinary shareholders, offering to buy shares (upto 20% of the total outstanding shares of the company) at the same price. It seemed, from the letter, that the promoters did not make the open offer, and hence violated Sebiâ€™s Takeover code.
At the time of the news reports coming out, the Pyramid Saimira shares were trading at Rs 60. If the Sebi letter and the news reports were true, the promoters would have been forced to make an open offer at Rs 250. â€œShare at Rs 75. Open offer Rs 250,â€ screamed the headline in DNA Money. With reports chorusing the impending offer at Rs 250, the shares of the company shot up.
Pyramid Saimira admitted to receiving a couriered letter from Sebi and confirmed the news. It seemed everything was in order.
However, a couple of days later, Sebi clarified that it had never sent any such letter. And Pyramid Saimira too woke up to realise that the â€œSebiâ€ letter was forged. By this time, the share price had gone up to Rs 83 from the previous Rs 60s. And as the price went up, someone â€“ later revealed to be Nirmal Kotecha, a company co-promoter â€“ heavily sold his shares. And exited at a profit before the stock came crashing when it came to light that the reports were fake and there was no Sebi letter and hence no open offer at a high price either.
Where did the media get this fake letter from? Business Standard said in a front page mea culpa that it got the letter from one Ashok Jainani of Khandwala Securities. Letâ€™s not forget that news media never reveal their sources, whether the reports are right or wrong. (in BS words: Like other media organisations, Business Standard was duped by a forgery. We apologise to all our readers, to Sebi and to Pyramid Saimira) Rather than admitting to the failure of their own fact-checking mechanisms, the report sought to pass the blame to an analyst. Other media outlets had received the letter from one Rakesh Sharma, a PR agent. Lets also not forget that business media routinely eat of the hands of the PR industry.
The police have since arrested PR guy Rakesh Sharma, and questioned Nirmal Kotecha who sold his shares when the stock had gone up. Investigations are on, but there is still no clarity on who forged the letter, who transmitted it among the media and how our venerable business media gleefully swallowed the letter without even a simple fact-checking with the corporate finance department of the market regulator Sebi.