‘Once unsuspecting investors entered the scrip, the said entities allegedly offloaded their holding at an inflated price’.
Indian market regulator the Securities and Exchange Board of India (SEBI) has cracked down on individuals and companies that have been using YouTube channels and social media allegedly to falsely manipulate stock prices and dump them later at higher prices, causing unfavourable losses to innocent investors.
In an interim report released by SEBI on Thursday, at least two companies—Sadhna Broadcast Limited and Sharpline Broadcast Limited—have been named for alleged manipulation of stock prices. The report says that Sadhna Broadcast Limited pumped up share prices of the company by 10 times the actual price by using manipulated videos and social media advertising campaigns, luring retail investors to invest in their shares and later started to dump them at inflated prices, a charge denied by sources close to the entity.
Similarly, Sharpline Broadcast Limited allegedly used the same strategy to pump up their stock prices by more than 500% in a period of just seven months. “SEBI received certain complaints wherein it was alleged that there was price manipulation and offloading of shares by certain entities in the scrip of Sadhna Broadcasting Limited and Sharpline Broadcasting Limited. The said complaint alleged that misleading YouTube videos with false content, backed by paid marketing campaigns worth crores of rupees for additional reach, were being uploaded to lure investors. Once these unsuspecting investors entered the scrip, the said entities allegedly offloaded their holding at an inflated price,” the SEBI’s interim report said. This too is being denied by sources.
According to the report, the stock price of Sadhna, which was at Rs 2.55 per share in January 2022, reached Rs 33.15 in August after a series of videos were released on YouTube by “experts” on reasons to buy their stocks. As the prices started to increase after the release of the series of videos, entities from the companies started dumping their stocks at inflated price.
The videos were uploaded on two YouTube channels, named, “The Advisor” and “Moneywise” which had lakhs of subscribers and crores of viewership. The company also used Google ad promotions to promote these videos to garner maximum reach and target gullible and innocent retails investors. Interestingly, the videos uploaded on these two channels were also deleted once the target was achieved.
“These YouTube videos peddled false and misleading news to recommend that investors should buy the Sadhna stock for extraordinary profits. Subsequent to the release of the misleading YouTube videos, there was an increase in the price and trading volume of the Sadhna scrip. The volumes appear to have been contributed by a large number of retail investors likely influenced by the misleading YouTube videos. During this period, certain promoter shareholders, key management personnel of Sadhna, and non-promoter shareholders who held more than 1% of shareholding in Sadhna, offloaded a significant part of their holdings at inflated prices and booked profits,” the SEBI order said.
The SEBI has named 31 entities who were allegedly involved with manipulating and inflating the prices of Sadhna and registering a profit of Rs 41 crore together in less than six months. The SEBI along with the promoters and directors of Sadhna, have also named actor Arshad Warsi and his wife Maria Goretti Warsi for their alleged involvement and participation in stock manipulation. Both Arshad Warsi and his wife together have made a profit of Rs 67 lakh in seven months, the SEBI has alleged.
The story of Sharpline is also similar. According to the SEBI report, Sharpline allegedly used two YouTube channels, “Midcap calls” and “Profit Yatra” to “peddle false and misleading news” to recommend retail investors to buy their stock. The stock prices of this company following the release of the series of videos also increased by more than 300% which was later offloaded by the insider shareholders, taking a huge chunk of the profit and bringing the prices down for the retail investors. The SEBI has named 26 individuals and entities together who were involved in the stock manipulation of Sharpline and has banned them from trading in the capital market.
Sources close to all these entities and individuals, however, have denied all these allegations.