The Securities Exchange Board of India (SEBI) has advised investors to be careful when investing in Small and Medium Enterprises (SME) stocks.
SEBI has specifically cautioned against relying on unverified social media posts, tips, or rumors when making investment decisions.
This advisory has been issued to protect the interests of investors.
Concerns About Misleading Announcements
In an advisory dated August 28, 2024, SEBI noted that some SME companies or their promoters tend to exaggerate the company’s operations after it gets listed on the SME segment of the stock exchange.
These companies often make public announcements that paint an overly positive picture of their operations.
Following these announcements, they might declare corporate actions such as Bonus Issues, Stock Splits, or Preferential Allotments.
These announcements often create positive investor sentiment, leading to increased share purchases.
However, this allows promoters to sell their shares at a higher price.
SEBI mentioned that it has taken action against such companies, with details available on their website.
Growth of SME Platform Since 2012
The SME platform on stock exchanges was launched in 2012 to help emerging businesses raise funds.
Since its inception, there has been significant growth in the number of SME issues and investor participation.
Over the last decade, Rs 14,000 crore has been raised through these platforms, with Rs 6000 crore raised in the year 2023-24 alone.
