Zomato tanks 22% in two days wiping out over ₹9,000 crore investor wealth – here’s what is happening

• Zomato shares fell by 22% in two days, wiping out over ₹9,000 crore of investor wealth.
• The fall may seem sudden, but this was expected to happen.
• Here’s why the Zomato stock tanked today.

Shares of Zomato tanked 22% in the last two days, wiping out over ₹9,000 crore of investor wealth. Zomato is a leading food delivery service – the only listed one, while its rival Swiggy is still not on the stock exchanges.

According to data obtained from the stock exchanges, there was a huge volume of trades as soon as the markets opened on July 25. Zomato’s shares plunged over 10% during this time. While the sale volumes subsided later, the stock declined further.

So why exactly did the Zomato stock tank 22% in two days?

Zomato’s shares tumbled today because the investor lock-in period ended on July 25. As many as 613 crore shares which were locked in since the initial public offering (IPO) in July 2021, which can now be traded freely.

This is not the first time that an investor lock-in period for Zomato has ended. Back in August last year, too, the company’s shares tumbled 8% as the lock-in period for anchor investors ended.

Now, the lock-in period has ended for promoters and employees, and it is likely that many of those shareholders have likely cut their holdings – according to market data, the Zomato stock witnessed volumes of 64.5 crore in the last two days.

What is the investor lock-in period?

Lock-in period, as the name explains, is a period during which the shareholders cannot sell their holdings.

Lock-in periods are essential to prevent extreme volatility in the stock immediately after it’s listed, giving the company enough time to build its business model and demonstrate its strength in the market.

Different classes of investors have different tenures of lock-in periods. For instance, Zomato’s anchor investors had a lock-in period of 30 days, which ended in August last year. Now, the lock-in period for promoters and employees has ended today, a year after the Zomato stock was listed on the stock exchanges.

$ZOMATO.NSE Has broken a Psychological support of 50 with volumes. Looks to be heading towards 39 / 31 levels.

— (@cobbervipul) July 25, 2022

SEE ALSO:

Reliance Jio posts a moderate 5% increase in profits in Q1 FY23, adds 10 million new subscribers

Infosys reports a sequential decline in net profit, but increases revenue & margin guidance for FY23

Zero tolerance for high volatility, says RBI guv Shaktikanta Das as Rupee stays above 80/$