New Delhi, April 2 -- The Securities and Exchange Board of India is likely investigating allegations of pump-and-dump operations involving multiple small and medium-sized listed companies and has conducted search-and-seizure activities in recent months, two people close to the development told VCCircle.
The people, who declined to be identified due to the sensitive nature of the matter, said the capital markets regulator could be possibly looking into as many as 80-90 SME stocks.
SEBI is checking whether promoters of these companies hired social-media influencers through merchant bankers to manipulate stock prices, the people said.
According to one of the persons cited above, the regulator is investigating one Hemant Gupta and his son Rohan Gupta for using social media handles such as @desiwallstreet and @wealthsolitaire to allegedly manipulate stock prices and profit from them. As part of this process, SEBI conducted search-and-seizure operations in premises associated with the father and son in January, the person added.
The two social media handles do not carry any posts after January 20 which, according to the two people, is around the time SEBI conducted the search-and-seizure operations.
VCCircle has written to SEBI and Rohan Gupta and the article will be updated once the responses come in.
The two social media handles carry discussions on stocks with commentary on their positive attributes, but with a disclaimer that these were not buy or sell recommendations.
For example, Wealth Solitaire posted about an elevator manufacturer highlighting their "massive expansion" and about a mining equipment maker pointing out their "superior product", "state of the art facility" and "professional management". The Desi Wall Street handle posted about a pickle exporter that made "landamark [sic] acquisition for brilliant outlook" and a non-bank lender calling it a "top NBFC pick for multibagger returns".
That said, there is no proof that all the stocks discussed by these handles have been manipulated or that their promoters hired the services of the Guptas.
The two people cited above also said that SEBI is looking into the father-son duo's association with four merchant bankers who are active in SME IPOs. The people said that Hemant and Rohan Gupta are known to various merchant bankers, who connect them with the promoters of companies who are allegedly looking to manipulate their stock prices.
Meanwhile, a third person, who seems to be aware of SEBI's investigations, has written a letter to the regulator, anonymously, asking for urgent action against these operators. This person has asked SEBI to issue an interim order to restrict trading by these entities, to freeze their demat accounts and to refrain them from using social media platforms. VCCircle has reviewed a copy of this letter.
"I wish to highlight a broader and deeply concerning nexus between operators, promoters, and merchant bankers in SME IPOs. Merchant bankers, acting as intermediaries, allegedly facilitate and enable such arrangements by connecting operators with promoters, thereby artificially inflating stock prices to create an impression of successful listings and attract future subscriptions," the letter says.
Published by HT Digital Content Services with permission from VC Circle.