Shares of Paytm, the recently listed financial services company, plummeted for the second day in a row, as traders and bankers blamed one of India’s worst market debuts on overly ambitious valuation targets.
Shares of Paytm, backed by Japan’s SoftBank, China’s Ant Financial Services and Alibaba, closed down 27% after going public last Thursday, and fell another 13% on Monday after Friday’s market holiday.
This made Paytm’s IPO price about 37% lower than its IPO price, and lost approximately $8 billion from the company’s market value in just two days of transactions. The chief financial officer said the plunge was “unexpected.” .
Paytm raised US$2.5 billion from the IPO, valued at approximately US$20 billion, and prepared a considerable payday for its backers. However, bankers and brokers familiar with the transaction said that Paytm’s record listing, investors’ insistence on high valuations, weak domestic demand, and India’s strict rules on the allocation of shares to different types of investors have ensured its destructive decline. .
“Obviously, the way the stock behaved… was unexpected,” Paytm’s Chief Financial Officer Madhur Deora told the Financial Times. “We are very sensitive to the fact that some shareholders who support us do not expect this kind of performance in the stock price,” he said.
Critics of the company said that Paytm was too focused on creating financing records, and after submitting the draft prospectus in June, top supporters pushed Paytm to increase its IPO size from approximately US$2.2 billion to US$2.5 billion.
The head of Asian equity capital markets at an investment bank on Wall Street said: “This is a very specific response to the way this book is distributed and the people in this book,” adding that the deal has shown many signs of value. “.
A person close to the company believes that the size of the transaction is set according to the needs of investors and bankers, and the need for regulators to reduce investor holdings. Among them, Ant Financial is subject to India’s restrictions on China. Later sold part of the equity. Investment last year.
The head of the Indian capital market of another Wall Street bank said that many long-only buyers participated as anchor investors. They were not allowed to sell their shares within 30 days and obtained enough shares from this part of the transaction. , This must cover 45% of the sold shares.
They basically did not appear in the main institutional investor segment, accounting for 30% of the transaction. This led to other investors, who originally expected that only a small part of their own large orders would be executed, but their share was far more than expected.
The banker said that for bookrunners Morgan Stanley, Goldman Sachs, JPMorgan Chase and Citigroup, covering the main institutional parts of the book is a “real extension”, and many hedge funds “get more than they bargain.” need more”.
Due to Paytm’s lack of profits, almost no Indian mutual funds, and weak demand from the wealthy (they get 15% of the sold shares), the overallocation of institutional investors has exacerbated the 10% ceiling on retail risk exposure.
“All these guys [institutional investors] Are very well distributed, many of which are entering the market [through selling],” said the banker.