Shares of Yes Bank declined as much as 17.8 percent on Monday to Rs 21. The slump comes after the bank announced a floor price of Rs 12-13 per share for its Rs 15,000 crore follow-on public offer (FPO) that will open on 15 July. The floor price is over half of the stock's Friday's closing price of Rs 25.50.
Traders are reportedly selling the shares for higher value so as to re-purchase them at lower rates at the FPO. The pricing is attractive for new investors but there's more to understand before one invests.
Experts say that Yes Bank chose the FPO route for fundraising as it allows freedom in pricing the issue when compared to a Qualified Institutional Placement (QIP) route which requires pricing around recent market prices as per a formula set by SEBI (Securities and Exchange Board of India).
To boost capital levels in line with regulatory norms, Yes Bank's board is going to launch the FPO. The attractive discount given in the FPO will attract more market investors and reduce the burden on the consortium of banks that are the stakeholders.
Meanwhile, a Moneycontrol report said that SEBI may look into a large amount of share transaction of the bank under the Securities Lending and Borrowing Mechanism (SLBM). According to the report, on July 9, investors borrowed 95,99,987 shares worth Rs 5.9 crore for an interest rate of around Rs 7 per share. These shares were borrowed for a one-month period, with settlement due on 6 August.