Preferential share issue: Shares of 31 companies tank after BSE suspension

MUMBAI: The BSE’s decision to suspend 31 companies over alleged misuse of their preferential issue of shares resulted in a crash in their stock prices on Tuesday. The BSE on Monday said that it was suspending trading in 31companies from Thursday till they provided auditors certificate with regard to their preferential allotment of shares. It said the suspension would be revoked later if no misconduct or misuse with regard to preferential issue was found.

Shares of companies including CMI, Frontline Business Solutions and Sphere Global Services crashed by 20% on Tuesday. Shares of Diligent Industries, Cupid, Tilak Finance and Global Infratech fell by 5-15% on the back of BSE’s action.

On March 4, BSE said it had noticed “substantial increase in manipulation/abrupt movement in the prices of securities wherein common modus operandi is through the route of preferential allotment.” “While the exchange, from time to time, has taken requisite steps to detect and contain such instances, it is felt necessary that further pre-emptive measures should be adopted to curtail misuse of the exchange’s system,” it had added.