Absolut Corruption

A few weeks ago I saw my Google Finance market cap section light up on one particular company based in India.  Apparently their market cap had dropped over 60% in one day on extremely heavy volume. I did some research and found that the board of Satyam Computers (NYSE:SAY and also trades on Bombay) made a bid to buy the founder's private real estate company to help diversify the business. The stock was ripped apart as a result because investors thought it was somewhat odd that the company would approve such a deal without involving the shareholders. 

In India there are these large dynasties which are fairly young. These dynasties don't just do one thing - for example, "Reliance" is a company that does everything from grocery stores to wireless phones to manufacturing. Reliance was split into two companies, each owned by the Ambani brothers (two of the richest men in the world), and both companies are public on various exchanges. 

Tata is another example of a dynasty that creates everything from cars to chemicals to consumer products. 

The point is it wouldn't be considered abnormal inside of India for a company to branch out and diversify. In the case of Satyam, however, there were too many unanswered questions. Why would they approve a multi-billion Rs deal on a private business owned and run by the founder. Even more troubling is the name of the private business, Maytas (or Satyam backwards).   It certainly left me with an uneasy feeling.

After the announcement shareholders around the world, including India, revolted.  They demanded better shareholder accountability and rightfully so. One day after Satyam announced were buying Maytas, they backed off due to the shareholder reaction. The stock went from roughly $12+ to $5.75, and the next day back over $8. Since then it was trading around $9, and I've been watching it ever since out of interest.

Well, not so shockingly, today I read that Satyam's founder admitted to fraud. Apparently they cooked the books for some time, and they mis-stated revenues, profits, etc. The stock tanked yesterday on Bombay - down around 90% at some point. Today on New York the pre-trading showed it was well below $1, but it seems to be halted now.  I imagine they don't want yet another fraud to drag down the entire market.

I have a real problem with this.  When will the corruption and greed stop?  Did they not learn as children that it's wrong to steal? This better be a wake up call for every regulatory agency around the world - investors are losing confidence in the markets and consumers are losing confidence in general.  I am still shocked over the Bernard Madeoff scheme - and now this?  What next?  

I guess what goes around comes around.  Except in some cases it takes decades for it to come back, but at least there is hope that justice will be served.   My mother always said if you don't have anything good to say then keep it to yourself...  I'm going to stop now :)