Zomato Plunges 11% to Record Low as IPO Lock-Up Period Ends
(Bloomberg) -- Shares of Indian online food-delivery and restaurant platform Zomato Ltd. plunged in Mumbai after the end of a lock-up period for investors that had stakes in the company prior to its initial public offering.
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The stock dropped 11% to a record low of 47.60 rupees.
Zomato’s offering last July raised close to $1.3 billion and lured investors including Morgan Stanley and Fidelity Investments. China’s Ant Group Co. was an early holder, having initially invested in it in 2018, owning a stake of about 16% before the share sale.
After a surge following the debut about one year ago, Zomato shares pared those gains to now trade about 40% below the IPO price. That compares to a 4.9% increase for the Nifty 50 Index over the same period.
Zomato’s successful IPO last year set the tone for the coming-out parties of a generation of Indian unicorns, including digital-payments firm One 97 Communications Ltd. But their shares have also plummeted as doubts persist about the valuations of loss-making technology firms, particularly as global macroeconomic uncertainty mounts.
The company is competing against deeper-pocketed rivals including Amazon.com Inc. and Naspers Ltd.-backed Swiggy, presenting hurdles in how quickly it can become profitable. Its recent acquisition of fellow startup Blinkit in quick-commerce, another high-competition, high-cash-burn segment, has left investors unimpressed.
“The shine of new age IT stocks is fading away at a very fast pace,” said Mohit Nigam, a fund manager with Hem Securities Ltd. Zomato’s $570 million acquisition of quick-commerce firm Blinkit, which loses 84 rupees ($1.10) per order, has acted as a catalyst in the stock’s downward movement, he said.
The delivery giant reported a smaller-than-expected loss for the March quarter. Some analysts anticipate Zomato will narrow its red ink over time, and point out that the meal-delivery market remains in its infancy.
Zomato is the latest Asian technology company to see shares under pressure following the end of IPO lock-up periods. Chinese artificial-intelligence-software maker SenseTime Group Inc.’s collapsed in Hong Kong last month once restrictions on sales by cornerstones ended.
(Updates price in headline, second paragraph, adds analyst comment.)
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