Paytm Shares Fall 37% In Just Two Days

December 8, 2021

Share prices in Paytm, the recently listed financial services company, have plunged for the second day in a row. The India-based fintech company is backed by Softbank of Japan and Ant Group of China. Day traders have blamed its appalling market debut on an overambitious initial market valuation.

Paytm stock fell by 27% following its listing on Thursday, November 18th, 2020, and plunged a further 13% on Monday 22nd, following Friday’s market holiday.

As a result, Paytm is currently languishing at about 37% lower than its IPO pricing, with approximately $8 billion having been wiped from the company’s market capitalisation in just two trading days. A CFO for the company admitted that the plunge had been “unexpected”.

High Expectations

Prior to launch, the firm had raised $2.5 billion from the IPO and was valued at approximately $20 billion.

As a result, its backers were lining up for a huge payday. Brokers and bankers who were familiar with the ins and outs of the deal considered Paytm’s push for a record listing, coupled with investors insisting on a high valuation, low domestic demand and strict laws for allocating shares as a combination that would ensure a damaging fall.

Madhur Deora, Paytm’s chief financial officer, released a statement in which he admitted the brand was “totally sensitive” to the fact that most of the shareholders backing the company would not have expected such poor performance in terms of share price.

What The Critics Think

Some experts believe that Paytm had put too much focus on bagging a fundraising record. Its top backers had pushed the company to increase its IPO size from $2.2 billion to $2.5 billion after filing a draft prospectus in June 2021.

Sources close to the company argued that the deal size had been preemptively set in response to high demand from bankers and investors, although regulations had meant that some large investors, including the aforementioned Chinese firm Ant Group, were forced to sell off large swathes of their stakes after being hit with Indian sanctions on Chinese investment towards the end of last year.

At present, hopes for a bull run have been seemingly nullified by two successive days of losses, although many day traders will be keeping an eye on Paytm in the coming weeks in the hopes of benefitting from a reversal of current trends.