ZEE shares tank 30% to hit lowest level since Aug 2020

Shares of Zee Entertainment Enterprises Ltd (ZEEL) tanked 30% during the intraday trade today as the selling pressure continued after the company's much-awaited $10-billion deal with Japanese entertainment behemoth Sony Corp fell through.

The stock of ZEEL opened a gap down at ₹208.60, down 10%, thereby hitting the lower circuit soon after the market opened on Tuesday. The stock later tumbled more as the BSE changed the dynamic price band for ZEE to 15% from 10% earlier, and later to 25% and 30%.

When the report was filed, the ZEE stock was trading at ₹165.30 on the BSE, which is down 66.45 points or 28.67% against the last close. On the NSE, the stock is trading at ₹165.60, down 28.44% or 65.8 points against the previous session close of ₹231.40.

At 1.20 PM, as many as 84.42 lakh shares were changing hands on the counter against a two-week average of 23.08 lakh. The stock touched its new 52-week low at ₹162.25, surpassing its previous low of ₹172.25 hit on December 12, 2023. It’s the lowest mark the stock has hit since August 14, 2020. In terms of single-day drop, the ZEE shares witnessed their biggest slide since January 25, 2019, when the shares plunged 33.55%.

The current slide has eroded investors' wealth, reducing ZEE's m-cap to ₹15,867.78 crore. With this fall, the Zee shares have fallen 31.81% in the past week alone, while the scrip has seen a 36.42% decline in the past month. Over the six-month and one-year period, the ZEE shares have tanked 24.33% and 41.15%, respectively.

The TV broadcasting & software production shares are currently trading below all 8 moving averages i.e. five-day, 10-day, 20-day, 30-day, 50-day, 100-day, 150-day and 200-day. In the broader market, the BSE benchmark is down 0.96% while Nifty is down 1.02% today amid profit booking and panic selling by retailers.

After the deal collapsed, multiple analysts downgraded the Zee stock, fuelling a downward slide. Researchers at CLSA say with the merger terminated, Zee’s valuation will likely decline to "12x PE levels (Aug-21) seen prior to the merger announcement". The agency has downgraded the stock recommendation from “BUY” to “SELL”.

Elara Capital also downgraded the Zee share to "SELL", with the target price pared to ₹170. It says the merger with Sony was the "key valuation driver" to move up in the past two years. Similarly, CITI has downgraded the stock to "SELL", with the target price cut from ₹340 to ₹180.

Zee’s proposed merger with Sony after required regulatory approvals, including from the National Company Law Tribunal (NCLT) and approval of 99% of Zee’s shareholders, was called off on Monday as Sony sent a deal termination letter to the company.

Sony has demanded that Zee must pay a termination fee of $90 million for “alleged breaches” and has even invoked arbitration against Zee. Zee has denied Sony’s assertions of the breach and said that Zee’s CEO, Punit Goenka, was agreeable to “step down” in the interest of the merger.

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