No sooner the government decided on a stake sale at a floor price of Rs 155, the shares of Hindustan Copper plunged and closed at almost the same level as the government's floor price.

The crash of almost 45% in the stock price in a matter of three days has eroded the wealth of shareholders who held the stock prior to the government's decision to sell a stake in the company. In fact, for two consecutive days the stock was at the lower end of the circuit filter of 20% and lost 40% in those two days.

But, very few understand the government's rationale of selling shares in Hindustan Copper at a low price of Rs 155, when the prevailing market price was Rs 263.

Some analysts argue that fundamentally the price of Rs 155 was a fair price. Also, the government had a bad experience in the past, especially for the ONGC issue where the price set was high, which dissuaded investors from applying.

Marketmen believe that the free float of the company is very less and hence the price of Rs 263, prevailing before the divestment may not be the appropriate price.

Whatever the reasons, those who accumulated the shares before the divestment was announced are the losers - and by a whopping 45%.

GoodReturns.in