What happened

Shares of Indian mining company Vedanta (NYSE:VEDL) are down 17.4% as of 12:30 p.m. EST Friday. The stock slump comes after investors voiced their disapproval of a deal in which the company would buy a portion of its founder and majority shareholder's stake in another mining giant, Anglo American (OTC:AAUK.F).

So what

In Vedanta's earnings release yesterday, the company announced one of its business units had purchased a $200 million stake in Anglo American from Volcan Investments. Volcan Investments happens to be the family trust for Vedanta's founder, Anil Agarwal.

An open pit mine.

Image source: Getty Images.

Vedanta's stock tends to move with the whims of Agarwal, who owns a 61% stake in the company. The family trust also owns a 20% stake in Anglo American, and this isn't the first time that he has tried to manufacture a deal between Vedanta and Anglo American. 

Check out all our earnings call transcripts.

Now what

These kinds of insider transactions are rarely in the best interests of public shareholders, and chances are any investor not named Agarwal isn't going to benefit much from acquiring Volcan's stake in Anglo American. 

Companies that have large founder ownership stakes can be great investments because the founder's incentives are aligned with other shareholders. Vedanta's complex ownership structure isn't one of those cases, though, and investors shouldn't be too tempted by this mining and energy giant, even if shares trade at a low price-to-earnings ratio of 7.