Insider trading in Zee Entertainment Share ? Big Bulls involved !
- What's the story?
It has been an entertaining week which started with a call by Invesco, the largest shareholder in Zee Entertainment, for the ouster of the present management. The week ended with Sony Entertainment buying out Zee Entertainment.
The fact that the deal is positive for shareholders of Zee Entertainment is a no-brainer. An increase in market share coupled with complementary channels, regional penetration and presence across all genres makes this an almost perfect marriage.
From a shareholders’ point of view, there should be no objections to the deal except for the point raised by Invesco, who holds close to 18 percent in the company, making it the largest shareholder. Invesco wanted to hold an EGM to replace Punit Goenka as the MD and CEO of the company and reconstitute the board.
The deal addresses part of the issues raised. As Sony will hold 52 percent of the new entity, they will fill the board with its nominees. The only issue of contention for Invesco would be the continuation of Goenka as the head of the joint entity.
Invesco might pull its punches now that the board will be reconstituted and Goenka will not have the free hand he used to have earlier.
Ace investor Rakesh Jhunjhunwala is sitting pretty on gains of over Rs 60 crore. Jhunjhunwala bought 50 lakh shares on September 14, the day after the largest institutional shareholders Invesco Oppenheimer called for the ouster of CEO Punit Goenka and reconstitution of the board of Zee Entertainment.
From Jhunjhunwala’s purchase price of Rs 220 on September 14, the stock has zoomed to trade at Rs 345, at 10.02 this morning. That means a gain of Rs 62.50 crore or a return on investment of 56.81% in just nine days. Although the number may not mean much, on an annualised basis, this translates into a return of 2,303%.
BofA Securities Europe SA purchased 48.65 lakh shares of ZEE at an average price of Rs 236.2. Questions were raised in social media over the block deal happening just days before the announcement of the merger.
Someone who has been tracking the company closely would understand that the move made by Invesco in calling an EGM to oust the promoter family may have forced them to run to Sony or anyone else to protect their empire. There were rumours of the family knocking on the doors of some big industrialists to come to their rescue.The smart investor that he is, Jhunjhunwala would have seen through the game and placed a bet on the company. There was little to lose in the trade as Goenka would have found it difficult to survive the EGM especially after the independent directors had resigned. A change of control would have resulted in a re-rating and given Jhunjhunwala his profit.
Ironically, Invesco, with its activist action, just managed to create huge value for savvy individual and institutional investors. But it Invesco itself will have to wait it out to make a return on its own investment in Zee bought at Rs 400 a share.
- What's Next?
The deep value trade in Zee is over. With governance issues behind, and with a stronger competitive position in the broadcasting space, a good movie distribution business, and a finger in the high-growth OTT pie, Zee now has a long runway ahead for growth.Having said that, market regulator SEBI may step in to probe the deal, which would be best in the present circumstances to clear any doubts of insider trading in a deal that is almost picture-perfect.
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