Digital stock spike clouds HP offer

The stock today reached to its 52-week high level and closed at Rs 762.70 on the Bombay Stock Exchange and Rs 761.55 on the National Stock Exchange, well above the ceiling price of Rs 750.

Following HP's announcement on December 1 that it will buy out the public holding through a reverse book building, the Digital stock has soared by nearly 16 per cent.

A fund manager at UTI said retail shareholders will not opt for the buyback if the market price rules above offer price.

This means, he said, the offer is likely to evoke a poor response as HP has made it clear that there is no possibility of a price revision. UTI holds 2.79 per cent stake in Digital on September 30.

R Sukumar of Templeton AMC, which held 4.18 per cent stake as on September 30, refused to talk on the issue. Templeton held the highest shares among the domestic institutions, while LIC held 1.09 per cent stake.

Officials at ICICI Securities, advisor of the issue, said HP will go back to the drawing board to chalk out an alternative plan to delist the shares of Digital but it will not revise the offer.

Rajesh Agarwal, an analyst with CD Equisearch, said retail shareholders will always quote a price higher than the ruling market rate.

"Any rational investor will prefer to offload his shares in the market if the rate rules higher. Why should he opt for the offer at a lesser price?" he asked.

As per the reverse book building norms, the floor price of the offer will be fixed in line with the 26 weeks' average traded price on NSE preceding the date of the public announcement. Then the final price will be determined through a book building.