ITC shares saw a drop of 3% since yesterday’s high, but why did this happen so suddenly?
Why Sudden Drop?
ITC’s biggest shareholder (BAT), British American Tobacco, plans to sell some of its ownership in ITC. This news caused investors to sell their stake in ITC, leading to a decline in ITC’s stock value. This is very common when big shareholders decide to sell their shareholding, which causes panic among investors and leads to selling.
British American Tobacco (BAT), based in London, has hired financial institutions like Citigroup and Bank of America to help them with the deal. The estimated value of sales is 2.5 billion dollars. It is expected to be a block deal, which is a type of stock transaction that involves a large number of shares. Block deals mostly happen at a discounted price.
Buy Or Sell ?
It’s important to note that the dates, timing, and final price can change a lot, and nothing is certain now. Depending on market conditions, the deal can also be delayed by a week or so.
Analysts say that this might not affect the company’s price in the long run, but it will exert pressure on investors in the short run due to greater supply.
Despite this decline, Jefferies has given a buy signal to investors because ITC has a strong brand presence, and the current decline is only due to BAT’s divestment. In fact, Jefferies has said that it is an opportunity to buy the stock.
The Indian government has rules in place to control the level of foreign ownership in certain industries, including tobacco. This means BAT has to follow these rules when selling its stake in ITC and finding buyers who meet the regulatory criteria can be a complex process.
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage companies and not of TheStockMarketLive. We advise investors to check with certified experts before making any investment decisions.
