Is it Time for Paytm to Go Home?
By: Tonima Hossain
Paytm, one of India's largest digital payments and financial services platforms, hasn't done well on the first day of their IPO. Paytm is used by more than 333 million consumers, backed by SoftBank Group, Berkshire Hathaway Inc., and other influential companies. While other startups have done extremely well after going public, Paytm didn't seem to share this trend, even though this is India's largest IPO to date.
After selling $2.5 billion of stock, the shares declined rapidly. Starting off at the price of 2,150 rupees per share, equivalent to $28.95, it declined to 1,564 rupees, equivalent to $21.07. Using a circuit breaker, the prices were halted from falling further, since they had already fallen 20% from their opening price. This disaster started due to a few separate factors. Primarily, individual investors were excited about the IPO, due to the benefits they may achieve from gains on the first day of trading, otherwise known as listing day. But once the shares started falling, everybody began to give up on the IPO. A serious concern of investors was that Paytm is competing against PhonePe which is backed by giants like Google and Walmart; no one wanted to be stuck with the losing stock that was priced aggressively. In addition, a recent report written by analysts at Macquarie stated that Paytm's IPO should be listed as 1,200 rupees, and that Paytm was a "cash-burning machine" due to their no visible direction of profit. Radhakishan Damani, an Indian billionaire, aired his concerns claiming that e-commerce and fintech aren't destined to succeed in India as they have in countries like America. While the internet market in India has not fully been tapped into yet, the market makes it evident that potential alone cannot validate the price of a stock. While Paytm fell 37% in the first two days of trading, as of November 25th it has rebounded 20%. Paytm's opening day may indicate the stock is destined to fail, but a short period of time does not indicate how successful a stock will be in the future. There are few investors who are holding out hope and are using Paytm as a value investment, including Blackrock and Canada Pension Plan, who have increased their stake in Paytm by purchasing more stock. Looks like there are varying opinions on what the right move is, and only time will tell if the stock hit its peak or if it will keep on climbing.