Public M&A: Does SEBI’s Market Rumour Proposal Offer the Much-Needed Price Protection?

Public M&A: Does SEBI’s Market Rumour Proposal Offer the Much-Needed Price Protection?

Key Takeaways

  • In June 2023, SEBI introduced “rumour verification requirements” requiring listed companies to address market rumours; trigger for “materiality” pegged to “expected impact”on turnover, net worth, or value of profit/loss after tax
  • SEBI’s December 2023 Consultation Paper now proposes to (a) peg materiality thresholdsto stock and index price movements; and (b) most importantly, offer price protection fordeal-making
  • Price protection basis market rumour verification is a leap forward as it plugs the price spikedue to premature leakages; though taken a step backwards by making promoters (not just KMPs) liable
  • SEBI has proposed two methods of price protection: (a) up to 60 days of price protection; or(b)protection from the day of material price movement until the end of the next trading dayafter rumour confirmation
  • This analysis focuses on the price protection mechanism, and not on “material price movement” thresholds proposed in the Consultation Paper
  • For an in-depth analysis of the rumor verification regime, please refer to our previouspaper titled SEBI’s Proposed Disclosure Regime: Impact on Public M&A and DirectorsLiabilities and our webinar on Public M&A – Deal-making and Director Liabilities.”

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