Sebi's new guidelines on market rumour to help in fair pricing of M&A, other transactions: Experts

economictimes.indiatimes.com:

Sebi's new guidelines for managing stock price impact arising from market rumours will ensure that the share price used in the merger and acquisition (M&A), buyback, and other transactions are not artificially influenced by speculative market activities, experts said on Wednesday. Market rumours pertaining to a company's business can create significant volatility in stock prices, often leading to transactions that don't reflect a company's true value.
This market rumours could be related to anything, including exiting of top management, cancellation of an order and financial health.

«Sebi's framework addresses this issue by establishing a mechanism to determine the unaffected price — the price of a stock before the rumour surfaced.
»This price would be used for transactions unless the rumour itself caused price fluctuations in subsequent trading days," Trivesh, Chief Operating Officer of Tradejini, said.
In its circular on Tuesday, Sebi outlined the framework for calculating the adjusted Volume Weighted Average Price (VWAP) for considering unaffected prices in transactions.
The guidelines also mandates that the adjusted VWAP be calculated by excluding the price variations attributable to the rumour, thereby reflecting the stock's value before the market reaction to the rumour.
The aim is to exclude price disruption caused by rumours while determining the price for acquisition.
Generally, unaffected price refers to the share price of a company in case there is no market rumour. Since sharp price movements