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Paytm dives to record low, wealth destruction for IPO investors tops $10 billion

Thus far in January, shares of the company have nosedived more than 28 percent after brokerage firm Macquarie slashed its price target on the stock to Rs 900 from Rs 1,200 earlier as it sees limited signs of upswing in the company’s business fortunes.

Mumbai / January 21, 2022 / 03:20 PM IST
Paytm’s Founder Vijay Shekhar Sharma had recently attributed the fall in the stock price since its doomed listing in November to global factors and a lack of understanding of its business model by public investors.

Paytm’s Founder Vijay Shekhar Sharma had recently attributed the fall in the stock price since its doomed listing in November to global factors and a lack of understanding of its business model by public investors.

 
 
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Shares of One97 Communications, the parent of Paytm, slumped to their record low of Rs 952.3 apiece on the National Stock Exchange as investors still remain bearish towards the company’s prospects.

The near 4 percent crack in the stock has now taken the total wealth destruction for investors, who participated in the fintech major’s initial public offering, to over $10 billion. Paytm’s shares had entered the IPO market with a valuation of close to $19 billion at the top end of its price band.

The company’s market capitalisation now stands at Rs 62,166 crore as against Rs 1.4 lakh crore just prior to its listing.

Thus far in January, shares of the company have nosedived more than 28 percent after brokerage firm Macquarie slashed its price target on the stock to Rs 900 from Rs 1,200 earlier as it sees limited signs of upswing in the company’s business fortunes.

Further, the company’s stock is suffering from the weakness in technology stocks across the world due to the surge in global bond yields. The rise in bond yields is negative for technology stocks as it increases the discount rate used in their valuation models and therefore, reduces their overall valuation.

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The record low-interest rates across the globe after the onset of the pandemic had helped technology stocks thrive as it allowed investors to discount earnings far into the future. In Paytm’s case, the company’s lack of track record of profitability was no deterrent for IPO investors who accepted the company's rich valuations in the hope of profits that may arrive five-to-six years in the future.

Paytm’s Founder Vijay Shekhar Sharma had recently attributed the fall in the stock price since its doomed listing in November to global factors and a lack of understanding of its business model by public investors.

The selling in the stock in today’s session was likely driven by long-term investors given that delivery volumes on the NSE were at 37 percent, much higher than the 20-day average volumes of 29.6 percent.

The unceasing selling pressure in the stock remains despite some strong business updates by the company earlier in the month. Paytm, earlier this month, said loans disbursed jumped five times on-year to 4.4 million in the quarter ended December, while the value of loans disbursed rose 365 percent.



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first published: Jan 21, 2022 03:20 pm
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