Why Adani Enterprises Shares Crashed 83% and Exchanges did not have a lower circuit?

General
2

Firstly, there was some corporate action on Adani, yesterday june 3rd being the ex day.  

On June 2nd the stocks closing price was Rs 637. 

For every 1 share of Adani enterprise held you got

  • 1.4 shares of Adani ports. 1.4 x 305 (stock price of adani port on 2nd) = Rs 427
  • 1.8 shares of Adani power 1.8 x 35 (stock price of adani power) = Rs 63
  • 1 share of Adani transmission (ATL, which is unlisted) = Rs 10 (assuming face value)
  • and you continue to hold 1 share of Adani enterprises = price ? 

Considering AEL at 637 the day before, the new AEL stock yesterday when the markets opened should have been (AEL stock - (sum of all the new stock u got)). 

637 - (427 + 63 + 10) = Rs 137.  

What happened yesterday morning though was just incredible, the stock price instead of opening at around Rs 137 actually opened around 500. Anyone who had done the above research, and had the balls, could have made a killing yesterday. 

To make the matter worse, the exchanges were showing the stock price and % down based on previous closing price of 637. Ideally, this should have been considered as if it was an IPO listing. 

The typical retail mentality is to buy when the price is falling. So people ended up buying the stock all the way down until it hit the right level it should have first started trading at (around Rs 120 - 130). This stock would have caused an enormous amount of heartburn and losses to everyone who bought it yesterday between Rs 500 to Rs 130, and the losses would have been exponential for intraday traders doing this on leverage. At the same time, people who knew the 130 number, made a killing yesterday shorting the stock. 

Since Adani is on F&O there are no circuit limits. Stocks trading on F&O don't have any circuit limits in India. Check this answer on why no circuits for F&O stocks. 

18 Likes
3

but ideally, the stock going through split or any form of CA should have been adjusted prior to market open?

4

Yep all CA was done, but price discovery of new Adani enterprises stock still had to happen once the market opened. Something went wrong in the price discovery process.

5

Nithin, THANKS for the good explanation. Now, I got the proper answer. Btw, I don’t yet see the share of other Adani Companies in my portfolio yet. Shouldn’t they have been credited yesterday? Not sure if this process takes time.
On a related note, whether same case will be with Aditya Birla Nuvo and Pantaloons merger?

6

Yesterday was the ex date, so you should have stocks in two days from yesterday.
Yep, there might be similar opportunities with aditya birla and pantaloon as well. But whatever little experience I have had, usually you never get two opportunities in a row. Everyone will now be ready to jump on any mispricing, which will never happen. ;).

7

adani shares going down,how to sell shares?

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9

@loke4300 adani shares going down,how to sell shares?

1 Like
10

1.) You have shares in demat ?
2.) Which adani stock you are talking about ?

11

Yes,ADANI POWER

12

At the market opening, it instantly hits the Lower Circuit, because no one is ready to buy the shares. You can not do anything in this case. All you can do is just hit your order at market price everyday and hope that some buyers emerge.
Hitting Lower Circuit is always a risk in such stocks who are not in F&O.

13

It was some company motion on Adani that caused this. It shows that no matter how low the shares go, if investors don’t want them, they won’t.