Shares of recently listed financial services company Paytm plunged for a second day as traders and bankers blamed one of India’s worst market debuts on The valuation target is too ambitious.
Shares of Paytm, which is backed by Japan’s SoftBank, China’s Ant Group and Alibaba, closed 27% lower after listing last Thursday and fell another 13% on Monday after the market holiday. on Friday.
That left Paytm about 37% below its IPO price and wiped about $8 billion off the company’s market capitalization in just two trading days, with the chief financial officer saying the drop This is “surprise”.
Paytm raised $2.5 billion from its IPO, valued it at around $20 billion, and arranged a big payday for backers. But bankers and brokers familiar with the deal said Paytm’s record push for listings, investors’ insistence on high valuations, weak domestic demand and India’s strict regulations on listings. Allocating shares to different classes of investors have combined to guarantee a pitiful reduction.
“It’s clear how stocks have performed. . . what a surprise,” Paytm’s chief financial officer, Madhur Deora, told the FT. “We are completely sensitive to the fact that some of the shareholders who have backed us would not have expected this performance nor the share price,” he said.
Critics of the company argue that Paytm has focused too much on fundraising, while top backers have pushed Paytm to scale up its IPO after it filed a draft prospectus in June. from about $2.2 billion to $2.5 billion.
“This is a very specific response to how this book is distributed and who is in this book,” said Asia equity market head at a Wall Street investment bank, and said. added that the deal has shown many signs of “boosting value”.
A person close to the company argued that the size of the deal was designed to meet demand from investors and bankers, as well as the requirement to reduce the stakes of investors including Ant, having sell off part of its shares after being restricted by India to China. investment last year.
The head of Indian capital markets at another Wall Street bank said many buyers had long joined as anchor investors, who were not allowed to sell their shares for 30 days and who received more than enough shares from that part of the deal, this must include 45% of the shares sold.
They were largely absent from the main group of institutional investors, accounting for 30% of the deal. That resulted in other investors, who were expecting only a fraction of their large orders to be filled, receiving more stock than expected.
The banker said it was a “real time” for reviewers Morgan Stanley, Goldman Sachs, JPMorgan and Citi to cover the main institutional part of the book, and many hedge funds “get more what they bargained for”.
That over-allocation to institutional investors is compounded by a 10% cap on the retail rate due to Paytm’s lack of profitability, almost complete absence of Indian mutual funds, and weak demand from wealthy individuals who were granted 15% shares sold.
“All these people [institutional investors] already fully allocated and a lot of it is coming to market [through selling],” said the banker.
