Shares off food delivery platform operator Zomato on July 25 tanked over 13 percent to record lows after most of its shares came out of the mandatory one-year lock-in after the initial public offer (IPO).
The stock traded at Rs 46.80, down 12.77 percent as of 9.30 am on the BSE, driving the market cap down to Rs 36,848.70 crore ($4.61 billion). It was more than Rs 1.25 lakh crore at its peak, and has wiped off Rs 89,000 crore worth of investor wealth on a closing basis. With this crash, Zomato’s market cap has also fallen below the last private valuation of $5.5 billion.
The stock price is very close to the valuation Aswath Damodaran, a finance professor at New York University had pegged ahead of Zomato's IPO. He had said the shares were worth just Rs 41.
The lock-in period of one year for around 613 crore shares or 78 percent of Zomato’s stock ended on July 23. Analysts had cautioned that the company’s share price may face sell-off pressure.
According to rules set by the market regulator Sebi, those who held shares of a company before the IPO cannot sell their shares for a period of one year following the listing.
Also read: Understanding Zomato’s $570-million acquisition of Blinkit: poison pill or panacea?
The food delivery company had made a spectacular entry on Dalal Street on July 23 last year. It issued shares at Rs 76 in the IPO but it soon became a multibagger, scaling a lifetime high of Rs 169 on the BSE.
However, since then the journey has been downhill as investor euphoria has waned. Analysts and investors have started questioning the company’s profitability plan even as Zomato has had very little to show.
Shares of Info Edge, which also holds a stake in Zomato, fell about 2 percent as well.
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