Taylor Scott
YES Bank has been a short-seller's delight, with its shares being piggybacked with borrowed shares. The bank's shares fell to their lowest levels after the Reserve Bank of India took over its board and imposed a month-long moratorium. YES Bank's retail investors fell prey to their 'value hunting' as the shares lost 85% of their value. The bank's shareholders are restricted from offloading 75% of their holdings for three years due to an RBI-imposed lock-in. The short sellers appear to be speculating based on unpublished price information and countless negative messages circulated on WhatsApp/chat groups.
| Characteristics | Values |
|---|---|
| Share price | Rs 20.01 |
| Change in share price | Down 0.21% |
| Change in share price over the past month | Down 4.80% |
| Advice from stock market expert Kiran | Maintain a strict stop-loss of Rs 19 or Rs 18.50 |
| Advice from Kotak analysts | Sell |
| Advice from Emkay | Sell |
| Advice from ICICI Securities | Hold |
| Yes Bank founder | Rana Kapoor |
| Stake of Rana Kapoor and his family members | 9.64% |
| Short sellers | Made gains |
Explore related products
$34.71 $63
What You'll Learn
YES Bank shares fell 85% on Friday in 2020
YES Bank shares fell 85% on Friday, 6 March 2020, after the Reserve Bank of India (RBI) took control of the private lender. The RBI superseded the bank's board and restricted withdrawals for customers, capping deposit withdrawals at Rs 50,000 per account until 3 April. The bank's shares fell to a record low, with 22 crore sellers offering the stock and no buyers bidding.
YES Bank's share price had opened at Rs 33.20, nearly 10% lower, and fell further to Rs 5.55 on BSE. On NSE, the stock traded 85% lower at Rs 5.65. The lender's market capitalisation fell to Rs 2,711 crore. The bank's shares had already been declining, eroding almost 52% in value in the week before, 75.94% in a month, and 80% since the beginning of 2020.
YES Bank's troubles were seen as a negative reflection on the stability of the overall Indian financial system. The fall in share price was also attributed to worries about the coronavirus, with global markets struggling due to the pandemic.
Short-sellers have also been blamed for the decline in YES Bank's share price. Short-selling involves selling a stock that is not owned by the trader. Two promoter companies of YES Bank, Yes Capital and Morgan Credits, filed a complaint in September 2019, alleging that short-sellers were spreading false information and dragging down the bank's share price. They claimed that short sellers were speculating based on "unpublished price information" and "negative messages" circulated on WhatsApp and chat groups.
In July 2020, short sellers were again seen as taking advantage of YES Bank's troubles, with a spurt in trading volumes attributed to the bank presenting a short-selling opportunity.
Banks Without FDIC Insurance: What You Need to Know
You may want to see also
Explore related products
Short sellers spread false information
Short-selling is a legal and legitimate trading practice where a trader sells borrowed stock, hoping that the share price will soon fall, allowing them to buy it back at a profit. Short sellers often engage in extensive research to uncover facts supporting their belief that a stock is overvalued.
Short-and-distort is a form of market manipulation where short-sellers spread false claims to provoke shareholders to sell, driving the share price lower. In 2019, two promoter companies of Yes Bank, Yes Capital and Morgan Credits, filed a complaint with the surveillance departments of BSE and the National Stock Exchange (NSE), alleging that short-sellers were dragging down the bank's share price by spreading false information through WhatsApp and chat groups.
Short-and-distort schemes often leverage social media and online anonymity to spread misleading claims easily. To avoid falling prey to such scams, investors should conduct their own research and verify facts before buying stocks.
Enforcement actions against short sellers are possible, as seen in the case of the US Securities and Exchange Commission (SEC) and the US Department of Justice (DOJ) charging an activist short seller and his firm with securities fraud and a multi-year manipulation scheme to defraud investors. Companies responding to short-and-distort campaigns should involve cross-functional teams, identify the source and nature of the information, determine its impact on stock prices, and decide on a public response.
Transferring Apple Pay to Your Bank: A Step-by-Step Guide
You may want to see also
Explore related products
YES Bank's FPO discount price
YES Bank, a leading private sector bank in India, announced a follow-on public offer (FPO) to raise Rs 15,000 crore. The FPO opened on July 15 and closed on July 17, 2020, with a price band of Rs 12-13 per equity share. The minimum order quantity was set at 1000 shares, and the issue size for retail investors was Rs 12,000.
The FPO was launched to recover from bad debt and enhance the bank's solvency and capital adequacy ratio. Despite the bank's troubles, the FPO presented an opportunity for short-term and long-term gains. YES Bank shares had been performing poorly, falling from above ₹26 at the start of the week to a low of ₹24 on Friday, a drop of more than 15%.
The FPO floor price of Rs 12 was almost half of the current market price, which made it an attractive proposition for investors. However, the issue received a poor response in the unofficial market, with investors reluctant to buy at a premium. The large size of the FPO also meant that the chances of allotment were high, reducing investor enthusiasm.
Short sellers had been taking advantage of YES Bank's poor performance, borrowing shares to make gains. The FPO floor price announcement resulted in windfall gains for short sellers, with the bank's shares quoting at a premium of around ₹8 on Friday.
Transfer Apple Pay to Bank: A Step-by-Step Guide
You may want to see also
Explore related products
YES Bank's poor operational performance
YES Bank, one of India's largest private sector banks, experienced a crisis in March 2020, causing panic among depositors and widespread concern due to its significant role in the country's economy. The bank faced challenges following the Reserve Bank of India's (RBI) asset quality reviews in 2017 and 2018, which uncovered a sharp increase in impaired loans and significant governance lapses. This led to a complete change in management, and the bank struggled to address its capitalisation issues.
YES Bank's operational performance was further impacted by its high-risk lending practices, resulting in a substantial increase in bad loans. In 2017, the RBI identified these bad loans, and in 2018, they ordered Rana Kapoor, the founder of YES Bank, to step down as CEO. Subsequently, the Chairman and two independent directors resigned from their positions in November 2018. The bank's credit ratings suffered, and in November 2019, Rana Kapoor's estate sold all his YES Bank shares, highlighting the bank's financial troubles.
The bank's poor operational performance also led to job cuts, with nearly 2,500 employees, or over 10% of its workforce, being laid off in 2017. YES Bank cited digitisation, poor performance, and increased redundancy as reasons for these cuts. The bank stated that these actions were part of its regular human capital management practices and aimed to ensure higher productivity and improved efficiency.
YES Bank's struggles attracted short sellers, who took advantage of the bank's declining share price. Short sellers borrowed shares and speculated on the bank's downfall, contributing to a further decline in the share price. This activity led to complaints from promoter companies, Yes Capital and Morgan Credits, who alleged that short sellers were spreading false information to drive down the share price.
In conclusion, YES Bank's poor operational performance was characterised by high-risk lending practices, governance issues, and a failure to effectively address capitalisation challenges. The bank's financial troubles resulted in job cuts and became a target for short sellers looking to profit from the bank's declining share price. These factors collectively contributed to a loss of confidence in YES Bank and highlighted the fragility of the financial system.
Business Owners Policy: Does It Cover Banks?
You may want to see also
Explore related products
![Trapped [English Subtitled] (TV Series)](https://m.media-amazon.com/images/I/A1zp-dqy9zL._AC_UY218_.jpg)
YES Bank's low share price
YES Bank's share price has been on a downward trajectory since at least September 2019, when short-sellers were speculated to be taking advantage of the stock. The bank's founder, Rana Kapoor, and his associated investment firms held a 9.64% stake in YES Bank at the time. YES Capital and Morgan Credits, two promoter companies of YES Bank with Rana Kapoor's daughters as directors, filed a complaint with the BSE and NSE, alleging that short-sellers were spreading false information and dragging down the bank's share price.
In March 2020, YES Bank's shares fell to their lowest levels after the Reserve Bank of India took over its board and imposed a month-long moratorium, restricting cash withdrawals to ₹50,000 over the next month. This event caused the share price to drop by as much as 85% to a low of ₹5.55. Analysts from Nomura and Kotak Institutional Equities maintained a "sell" rating on the stock, with the former stating that the bank's equity value would be negligible under the moratorium.
YES Bank's troubles continued into July 2020, with its shares trading above ₹26 at the start of the week but falling to ₹24 on Friday, a drop of more than 15%. This decline was attributed to short sellers taking advantage of the situation. The bank announced a floor price of ₹12 for its FPO, which was expected to result in windfall gains for short sellers.
By July 2025, YES Bank's shares had declined for the fourth consecutive session, slipping 0.21% to close at ₹20.01 on the NSE. The stock had fallen 4.80% over the past month, struggling due to broader market volatility and weak investor sentiment. While the stock had previously shown a strong breakout, it had returned to a sideways correction zone, according to stock market expert Kiran. Kiran advised investors holding YES Bank shares to maintain a strict stop-loss of ₹19 or ₹18.50 to prevent further losses.
Withdrawing PrizePicks Winnings: Which Banks Are Accepted?
You may want to see also
Frequently asked questions
Short selling is when a trader sells a stock they don't own.
Short sellers took advantage of bad news about Yes Bank to drive down the share price. They also spread false information, leading to a 15% fall in share price in one instance.
Yes Bank's share price fell to its lowest level after the Reserve Bank of India took over its board and imposed a month-long moratorium. The share price fell by as much as 85% to Rs 5.55.
