With stock taking long to correct, large shareholders exited at the cost of the small ones
Even after Jet shut operations, stock markets assigned it a relatively high valuation
It ain’t over till it’s over," famously said baseball player Yogi Berra. It’s a mantra investors of Jet Airways (India) Ltd have held on to firmly.
The airline had suspended operations more than two months ago, and attempts to find a buyer for the airline have come a cropper. However, the company’s shares are taking a long time to land.
On Tuesday, after lenders finally dragged the company to the bankruptcy court, Jet’s shares fell as much as 41% in a single session. They had fallen by 31.5% on 18 April, the day after Jet announced that it is suspending operations.
However, in the two months in between, Jet shares largely hovered around the ₹150 mark. At that price, Jet had a market capitalization of around ₹1,700 crore. Along with its mammoth debt, that meant an enterprise value of about ₹9,000 crore for an airline that had stopped flying, which was clearly bizarre.
“The fact that the Jet stock has taken so long to correct has allowed some large shareholders to exit at the cost of retail investors," said a trader, adding that the markets regulator has not acted soon enough.
Every now and then, there was some news that generated hope about the revival of the airline. Seasoned traders said large shareholders used these opportunities to exit their positions at the cost of the uninitiated.
Retail investors as a percentage of total shareholding increased to 11.42% for the March quarter from 9.96% in the December quarter, according to data from BSE.
The share of retail investors may have increased further in the June quarter.
Last week, the National Stock Exchange announced that Jet’s shares will be removed from daily trading of futures and options from 28 June. This has accelerated the fall in Jet shares to some extent.
The decision of lenders to initiate bankruptcy proceedings this week has further helped investors to do a reality check. One striking feature about the beleaguered airline’s stock is the frantic pace of activity on the counter. The average daily turnover of Jet shares on BSE and NSE has been ₹282 crore, since the suspension of the airline’s operation.
Why should an airline, which is on its last legs, evince so much trading interest?
“Higher trading volumes in the Jet stock is merely indicative of the trading mentality in India, wherein traders like more volatility and speculation in general. For instance, people trade more in the Bank Nifty index rather than the Nifty index," said Chandan Taparia, derivative and technical analyst at Motilal Oswal Securities Ltd.
After Tuesday’s sharp fall, it looks like the Jet stock is running on fumes. However, some are still buying the stock at its beaten down price. It ain’t over till it’s over.