Zomato pre-IPO investor Moore sells off 4.25 crore shares in block deal at a loss

Amid large sell-off pressure on the Zomato stock, venture capital firm Moore Strategic Ventures has exited its entire holding of 4.25 crore shares in the company at Rs 44 apiece, according to block deal data. 

The cumulative size of the trade executed by Moore was around Rs 187 crore whereas it had bought the holdings for Rs 191 crore before the foodtech company’s initial public offering.

As such, Moore has booked a loss of around Rs 4 crore on the investment.

The New York-based VC firm had acquired 6,347 compulsorily convertible Series G shares from Nexus Ventures in January 2021 for about Rs 191 crore, according to company filings. When Zomato debuted in the public market in July last year, this special class of shares was converted to 4.25 crore shares of the food delivery company.

Experts expect more pre-IPO investors of the company to sell off their holdings even as Zomato’s market capitalisation has fallen below its last private market valuation of $5.5 billion.

With the lock-in period of one year for around 613 crore shares or 78 percent of Zomato’s stock ending last week on Saturday (July 23), analysts had cautioned that the company’s share price may face sell-off pressure this week.

“As there is no promoter, all shareholders, including the founders, collectively owning 77.87 percent who were locked in would be free to sell the shares without any disclosures on July 23. This would be a big overhang on the stock price,” Shriram Subramanian, founder and MD of proxy advisory firm InGovern, earlier told Moneycontrol.

Shares of the food delivery platform on July 26 slumped 12 percent to close to Rs 41 apiece, vindicating Aswath Damodaran, who said last year that the stock was not worth more than Rs 41.

Damodaran, a professor of finance at New York University often described as valuation guru, had said Zomato's IPO price of Rs 76 was “too expensive”.

Meanwhile, brokerage firm Jefferies has taken a contrarian call on the stock. It has a "buy" rating on the stock with a price target of Rs 100. The stock had opened at Rs 46.60 on July 26. 

According to analysts at Jefferies, the poor sentiment presents a buying opportunity and they expect profitability in the segment to improve, industry structure to get friendlier and the company to be geared towards preserving cash. 

The food delivery company had made a bumper entry on the bourses on July 23 last year. While its shares were issued at Rs 76 in the IPO, they listed at Rs 115 on the BSE with a premium of over 51 percent. Subsequently, Zomato breached the Rs 1 trillion market capitalisation mark and the shares scaled a lifetime high of Rs 169 on the BSE.