SEBI recently broke a story where our beloved ‘Circuit’ AKA Arshad Warsi and 44 individuals and companies were allegedly involved in an old scheme called the Pump and Dump Scheme, but in a new way! Let’s dive deep into the story.
Imagine this scenario:
You are an aspiring investor who wants to invest in the stock market and get rich! But, to get rich, you need to find undervalued stocks that will skyrocket in value and make you rich, but how?
Then enters YouTube influencers with lakhs of followers, and people trust them more than anyone else. They pitch some stocks you have never heard of and paint a picture of a bright future for these companies.
They might even show you a stock chart already on the rise, creating a Fear of Missing Out (FOMO) effect that makes you want to jump on board immediately.
But here is the catch! The stock isn’t rallying because of its prospects. Instead, fake demand is created in these stocks. And this scam is called the Pump and Dump Scheme .
The scheme is clearly explained in the movie Scam 1992, where Harshad Mehta says, ‘Tip mili nahi hai, tip banani hai, aur market me failani bhi hai’.
So, when retail investors buy the share, these operators dump (book profits) at a pumped price, and once these operators have exited the stock, there is no one to create demand; hence, the share price crashes, and retail investors have to bear losses.
SEBI has banned 45 individuals and companies from the stock market owing to a YouTube scam! And the Bollywood actor Arshad Warsi is also making headlines because he is among the 45 individuals banned by SEBI.
What Did Arshad Warsi Do?
Arshad Warsi is in hot water for allegedly pumping up the prices of two stocks – Sharpline Broadcast Ltd and Sadhna Broadcast Ltd. SEBI has classified Arshad Warsi and his wife as volume creators and profit makers who kept buying and selling the shares of these companies. Arshad Warsi earned a profit of Rs 29.43 lakh, and his wife earned a profit of Rs 37.56 lakh.
According to SEBI’s report, Manish Mishra, the creator of YouTube channels Moneywise and The Advisor , had spent Rs 4.72 crore towards Google AdSense for promoting videos uploaded on YouTube.
According to the SEBI report, Sadhna Broadcast Ltd shareholders went from a mere 2,167 to 55,343 from June 2022 to September 2022. According to India Times, in the case of Sharpline Broadcast Ltd, the shareholders increased from 517 to 20,009 .
These YouTube videos made these companies look like the next big thing, which convinced gullible investors to invest their hard-earned money.
One video claimed that the Adani Group would take over the company, and the deal would lead to increased margins.
Another video claimed that the company would move from TV to movie production. And a big American company had entered into a deal to produce four movies with Sadhna Broadcast Ltd.
Moreover, they claimed that big mutual funds have already bought the stock, and promoters are increasing their stake.
These false claims may have misled investors as over 3.02 crore viewers had watched these Youtube videos, and many may have bought shares in the company. This led to a surge in price before the shares were eventually dumped.
Here is the chart of both shares!
What Did Arshad Warsi Have to Say About This?
Arshad Warsi tweeted, ‘Please do not believe everything you read in the news. Maria and my knowledge about stocks is zero, took advice and invested in Sharda (Sadhna Broadcast Ltd), and like many others, lost all our hard-earned money.’
This reminds us of Mr Warsi’s dialogue from Golmaal:
What Do We Learn From This Incident?
This incident occurred almost a year back, and nobody knew about it until SEBI broke the story. And till date, retail investors still rely on unsolicited advice offered by influencers on social media.
But this YouTube scam is a warning sign for retail investors. It highlights the importance of conducting thorough research before investing in any company.
Retail investors must realise that rumours, claims, and promises made on social media platforms are unreliable sources of information for investment decisions. They should instead rely on verified and credible sources. Even SEBI comes up with various campaigns that mention that investors must rely on SEBI-registered investment advisors and not on a person who claims to be an expert.
Moreover, it is essential to understand that investing is a long-term game and that chasing quick profits may lead to severe consequences.
So, next time, choose quality over quick profits and build a solid investment portfolio.
If you wish to create a portfolio based on solid research, then Teji Mandi can help you. All you have to do is invest in Teji Mandi Flagship or Teji Mandi Multiplier portfolio, and our expert research team will take care of the rest.
Protect your investments, and say no to unsolicited advice!
That’s it for today. We hope you’ve found this article informative. Until we meet again, stay curious!
*The stocks mentioned in the article are for informational purposes. This is not investment advice.