Nithin Kamath, the founder of Zerodha, has praised Reliance Industries for announcing the cost of acquisition (COA) for the Jio demerger on the ex-date. He stated that this move could aid in better price discovery and ensure that the buy average price was already adjusted on trading apps on the day of the announcement.
What Happened? In a three-part tweet, Kamath notes that companies should ideally announce the COA well in advance. The Zerodha co-founder pointed out that companies usually take time, even after the ex-date, to announce the COA.
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Without this information, trading apps cannot adjust the buy average price for holdings downward to account for the demerger. This delay can lead to retail investors panicking and exiting after seeing an artificial loss. He urged that if companies start doing this well in advance, brokers can adjust the price and show the accurate profit and loss to investors even on the ex-date.
This transparency could help investors stay invested by removing a reason to panic. Kamath’s comments highlighted the need for timely communication in corporate actions to ensure investor confidence and market stability.
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