2 Robinhood stock bets that went horribly wrong in September quarter | Economic Times

MUMBAI: Retail investors who get easily attracted to market talk and start buying beaten-down stocks in hopes of multibagger gains, seem to have gotten it wrong again.The stocks in which retail investors raised their stake the most in the September quarter are -- Future Retail and Future Consumer. They hiked their stake in Future Retail by 1,926 basis points (bps) in the quarter ended September to 25.09 per cent, and by 1,048 bps to 20.33 per cent in Future Consumer.“It is the classic case of retail investors getting it wrong. They hoped the stocks would boost post the deal with RIL, and they lapped up when the market talk was on,” pointed independent analyst Ambareesh Baliga. Even as the rumors came true, the retail investors went wrong.“Finally, all these (Future Group) stocks are going to merge into one entity. Earlier, it was a brand and retail story. Now, they are only going to be a third-party manufacturer and service provider,” he added.Since the deal in August, shares of Future Retail and Future Consumer have dropped 49 per cent and 39 per cent to Rs 69.35 and Rs 6.95, respectively.Both the stocks have dragged for a long time. Future Retail is down 83 per cent and 87 per cent over one-year and three-year period, respectively, while Future Consumer has eroded 71 per cent and 89 per cent, respectively, during the same period.Late in August, Reliance Industries announced its unit Reliance Retail Ventures (RRVL) will acquire the retail & wholesale business and the logistics & warehousing business from the Kishor Biyani-promoted Future Group as going concerns on a slump sale basis for a lumpsum total consideration of Rs 24,713 crore.The deal was a complex one – involving various inter-company transactions. In the first of the three-step process, the promoters will merge listed entities Future Retail, Future Lifestyle Fashions, Future Consumer, Future Supply Chain Solutions and Future Market Networks into Future Enterprises. Futures Enterprises will issue nine shares to Future Consumer shareholders for every 10 shares held by them, and 101 shares to shareholders of Future Retail Ltd. for every 10 shares held by them.Later, Future Enterprises will transfer the retail and wholesale business to Reliance Retail and Fashion Lifestyle, a wholly-owned unit of Reliance Retail through a slump sale.And finally, Reliance Retail and Fashion Lifestyle will invest Rs 1,200 crore in a preferential issue of shares by Future Enterprises for a 6.09 per cent stake, and will also invest Rs 400 crore towards its warrants, which on conversion, will amount to an investment of Rs 1,600 crore and result in an additional stake of 7.05 per cent. The shares and warrants will be issued at Rs 17.65 a piece.While retail investors scrambled to buy these stocks, foreign investors chose to smartly cut their exposure in the last quarter. Foreign institutional investors (FIIs) cut their stake in Future Retail and Future Consumer by 659 bps and 645 bps, respectively. Mutual funds, too, trimmed their exposure in these stocks by 324 bps and 25 bps, respectively.Deven Choksey, Group Managing Director, KR Choksey Investment Managers, pointed that whenever such a type of transaction takes place, retail investors jump in without understanding the contours of such deals.“While the deal came as a respite for Future Group promoters, there is not so much on the table for Future Retail and Future Consumer shareholders, at least in the near term,” said Choksey.“We need to wait and watch what Biyanis do with these ventures going ahead, once the deal is executed and the picture is clear,” he added.