In the Yes Bank crisis, one chart shows how rumours were used to trap small investors

• There were multiple rumours, source-based reports, in the last one year signalling investments into Yes Bank.
• While small investors bought shares based on these rumours, big investors including institutions reduced their stake.
• The public stake in Yes Bank more than doubled from June to December 2019, and now with the RBI limit on withdrawals and talks of a bailout, the small investors will see their wealth erode.

The unfolding crisis at Yes Bank will be a classic example for small investors who look to make a quick buck based on rumours. Most recently, on March 5, the stock zoomed nearly 27% on buzz that the State Bank of India (SBI) will be asked to bailout the private bank.

However, within hours, the Reserve Bank of India (RBI) has put a limit of ₹50,000 on withdrawals, and these investors will be kicking themselves. The fate of their investments is now dependent on whether there is a new investor, SBI or any other one, and how much they are willing to pay for it.

Now, the shares of Yes Bank, which are trading about ₹37 a piece, may be worth ₹1 soon, according to global brokerage JP Morgan.



There were multiple rumours, source-based reports, in the last one year signalling investments into Yes Bank. While small investors bought shares from big investors including institutions based on the market buzz. The public stake in Yes Bank more than doubled from June to December 2019. And that's only until December; there were many more such trades likely since then.


It is fair to expect a hard bargain from any one coming in. Global brokerage JP Morgan reportedly said that the bailout will come at a large cut for equity holders. "We believe forced bailout investors will likely want the bank to be acquired at near zero value to account for risks associated with the stress book and likely loss of deposits (Q3 financials have still not been disclosed)," it said, according to an IANS report.


SEE ALSO:
Yes Bank mobile and net banking down after RBI limits withdrawals to ₹50,000

Yes Bank under CEO Ravneet Gill⁠— eight months of wild mood swings