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Editorial

Why Was The PayTM IPO a Flop Show?

India’s largest IPO in a decade has turned a flop show! One97 Communications Ltd, the parent company of digital payments app PayTM, lost 27% of its share price on the day of its listing. Domestic retail investors had high hopes on the Rs 18,300 crore IPO. Nevertheless, investors were left surprised when the shares were listed at a discount on the stock exchanges. In this piece, we explore the possible causes that led to the failure, and whether the stock has any future investment prospects. 

Offloading By Promoters and Hedge Funds

The company planned to raise a total of Rs 18,300 crore through its IPO, Rs 8300 through a fresh issue (which goes to the company), and Rs 10,000 through an Offer For Sale (which goes to the promoters). The signs of an IPO debacle were pretty much evident at the beginning of the month. The highest number of shares were offloaded by Jack Ma’s Antfin (Netherlands) Holding B.V, Alibaba Group, and SoftBank Group. Other offloaders included some promoters and hedge funds. Hedge funds and Investment funds have an appetite for risk. They generally avoid playing on smooth grounds. Seemingly, the investment, venture capital, and hedge funds tried to take some money home by offloading stakes in the company. This wouldn’t have been the case if the companies saw a greater opportunity in the IPO.

Retail Investor Hype!

On November 3, 2021, the US Fed announced its plans to begin tapering quantitative easing by reducing interest rates and selling government bonds. While the announcement did not trigger a sudden reaction, investors knew it was time to slowly get their hands off high-risk assets, but obviously not the retail investors. Retail investors are individuals like me and you. The IPO was subscribed only 18% on Day 1. The retail segment was subscribed 78%, while the Qualified Institutional Buyers (QIB) and Non-Institutional Investor (NII) segments were subscribed only 2% and 5% respectively. By Day 3, India’s ‘largest’ IPO was subscribed 1.89 times, a small number for the hype around the company. In the end, the Foreign Institutional Investors and Retails investors managed to see the IPO through an oversubscription. 

Bad Timing

Timing is the most crucial element in an IPO. PayTM’s IPO is one of the last few IPOs of this season. The IPO bull run was powered by a rush of liquidity globally through quantitative easing and expansionary fiscal policies by various governments. This sudden rush of liquidity made its way to shares, IPOs, and other high-risk venues. The NIFTY and SENSEX are at an all-time high, and all the available liquidity has already been invested in the markets or IPOs. Almost all of PayTMs peers, despite high valuations, sailed through smoothly and gave investors a bang for the buck. This makes us ask, why did PayTM IPO fail while the IPO of its tech peers like Nykaa and Zomato sailed through smoothly?

We at marketfeed, in our article titled ‘Nykaa IPO: All You Need To Know’, pointed out the following: “The IPOs are coming out all at once with extremely high valuations and buzz in the market. It might leave the market out of liquidity. Nykaa is the first IPO going up in November and might therefore have a first-mover advantage. The company has grown significantly in a very small period, much faster than its other tech-commerce peers.”

The Future

Analysts had already signalled overvaluation for the company. An overvalued IPO can only sustain in a bull run. When the bears kick in, the fall can be bloody. The market has correctly valued the company through the discounted listing, dragging it towards the median valuation. As they say, the market decides its best value. Macquarie (a research firm) has assigned its lowest rating ‘underperform’ to the company. 

Despite being a loss-making company, Paytm has managed to trim its losses and expenses. While the company remains in net loss, its financial growth and stability have been healthy recently. The company does not have one specific listed competitor. It has a competitor in just about every domain it operates. This over-diversification can stunt the growth of the company in parent segments. The Macquarie report has mentioned that the company has ‘too many fingers in too many pies’. 

We are at the peak of the market cycle The flopped PayTM IPO is a red flag for over-valuation. While the company’s promoters made quite some money because of overvaluation, the retail investors suffered. Certain news reports suggest that analysts have advised to ‘sell and book loss’ to those who have received an allotment. It is advised that retail investors perform thorough research and take due caution before making a move.

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Editorial

Why was Jack Ma’s Ant IPO Stalled?

  • The Ant Group, which was earlier known as AliPay and Ant Financial, is an affiliate company of Billionaire Jack Ma’s Alibaba Group. The Ant Group recently announced, what is called the world’s biggest IPO to raise $34 Billion(approx Rs 2.51 lakh crore), with the company’s valuation standing at $313 Billion. A day before the IPO was to be launched, it was called off due to problems with the Chinese regulators. Some say it was because of a direct scuffle with the Communist Party of China. It is also said that Xi Jinping, the party supremo and President of the People’s Republic of China, directly is involved in stalling the IPO. Let us take a peek into the history of Ant Group and the problems that surrounded the IPO.

From AliPay to Ant Group

AliPay was launched in 2003 as a payment platform/gateway for the e-commerce platform Taobao. Taobao is a subsidiary of the Alibaba Group. AliPay’s slick payment app is synonymous with the UPI or digital payment gateway services in India like PayTM, GPay, BharatPe, MobiKwik, etc.

Years back, e-commerce wasn’t really trusted since it was a fairly new concept. There was a lack of regulation and a lack of trust between buyers and sellers. Transactions were pretty much direct. The buyers doubted that the sellers will dupe them of the money and not deliver the product. The sellers were afraid that the customer might not pay as was necessary. Moreover, if the product turned out to be faulty or misplaced, there was no sure-shot refund method. Maybe you have also used cash-on-delivery while ordering goods from Flipkart back in the day. To address this problem in China?, the Alibaba Group came up with AliPay.

AliPay would receive payment for an order from a buyer and keep it in a third account for the time being. Once the buyer received the order promptly and in proper condition, AliPay would transfer the money to the seller’s account. In case of discrepancies, the amount would be refunded and the product would be shipped back. This laid the basis of modern e-commerce across the world.

AliPay then went on to be rebranded into its parent company, Ant Financial, which later became Ant Group. Ant Group ventured various different financial services and products and services. Most of its revenue came from its online lending businesses(39.4%) followed by digital payment and merchant services like AliPay(36.9%). Their products include:

  • Alipay – a mobile wallet app that supports make and accept payments.[59]
  • Huabei (Ant Credit Pay) – a virtual credit card type of product that facilitates credit payments.
  • Jiebei (Ant Cash Now), a consumer loan service.
  • Ant Insurance Services.
  • MYbank – a cloud-based private online bank
  • Ant Fortune – a comprehensive wealth management app.
  • ZOLOZ – a global biometric-based identity verification platform.
  • Zhima Credit – an independent credit filling and scoring service for individuals.

HiRevenue Sources from Various Different Services of Ant Group

Vital Information on Ant Group’s Services

Why was Ant Group’s IPO Cancelled?

The Ant Group’s IPO was bigger than India’s Gross Domestic Product(GDP). It received bids worth more than $3 trillion. The company intended to raise $34 Billion, with the company’s valuation standing $313 Billion. The demand for the issue was so big, that the Ant Group decided to stop taking orders a day earlier than planned. The issue was expected to go live on both Shanghai and Hong-Kong stock exchanges. However, the IPO was called off at the last moment. 

There are various speculations as to what could have gone wrong. Most of them hint at bad blood with the ruling Communist Party of China. Jack Ma had criticized China’s financial regulators and the financial system and how it stifled innovation in that field. The Chinese regulators who were at the conference didn’t take the criticism well. According to some reports, Xi Jinping, the state supremo, personally made the call and got the IPO stopped. 

Right after the conference, the market regulators started making reports on how the Ant Group encourages the youth to take on a debt burden. This capitalistic expansion of Ant Group is apparently against the Communist principles of the nation. The company’s account books suggest that Ant Group itself only assumes the risk for 2% of the debt that is given through its lending platforms. In the essence of it, this is because Huabei and Jiebei, its two lending platforms are simply connecting banks and borrowers, where it itself doesn’t assume any risk whatsoever.

Will the IPO Go Through?

Hopefully, yes. The IPO has faced a lot of turbulence. Firstly from the Chinese regulators and even from Donald Trump. The Trump administration wanted to blacklist the Ant Group and prevent US Investors from putting their money in the IPO. However, the plans for the blacklist were called off later.


The Chinese regulators have now published new norms for online lenders and micro-lending which Ant Group will have to comply with. The regulators have even placed more obstacles for Ant Group to cross such as new capital requirements and some changes in the IPO. The entire process could take anywhere from 3 to 6 months before the IPO goes into effect.

Well, one thing is clear, even China’s richest man isn’t greater than his political bosses. The stalling of IPO cost Jack Ma, $3 Billion, and that is a lot of money. It is well before the time that we know who are the forces behind the stalling of the IPO.

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Market News Top 10 News Top Global News

Jack Ma to become 11th Richest Man after Ant IPO – Top10 Global News

1. Stocks Slump on Rising Covid Cases; Dollar Gains

U.S. equities slumped along with European shares on concern that rising coronavirus cases will weaken the global economy and as prospects dimmed for fiscal aid from Washington before the presidential election. Energy and materials companies were among the worst performers on the S&P 500 Index. In Europe, a gauge of tech stocks fell the most since March after German software maker SAP SE plunged 20% following a cut to its revenue forecast and warnings that the pandemic will hurt business through mid-2021. Boeing Co., Lockheed Martin Corp. and Raytheon Technologies Corp. slid on China’s plan to sanction the companies after the U.S. approved $1.8 billion in arms sales to Taiwan last week.

The S&P 500 Index decreased 0.9% as of early morning New York time.

The Stoxx Europe 600 Index fell 1.1%.

The MSCI Asia Pacific Index dipped 0.3%.

2. China to Sanction Boeing, Raytheon Over U.S. Arms Sales to Taiwan

China will impose unspecified sanctions on Boeing Co.’s defense unit, Lockheed Martin Corp. and Raytheon Technologies Corp. after the U.S. State Department approved $1.8 billion in arms sales to Taiwan last week. The sanctions will be imposed “in order to uphold national interests,” Chinese Foreign Ministry spokesman Zhao Lijian told reporters Monday in Beijing. The action follows the U.S. State Department’s approval last week of $1.8 billion in sales of new weapons for Taiwan and submission of the package to Congress for a final review. The deals, and an earlier one involving Lockheed F-16 fighters, are taking place amid rising tension between the superpowers ahead of the U.S. election next week. 

3. Pelosi Awaits Virus Stimulus Offer Today as Hope for Vote Fades

The three months of squabbling over a new round of virus relief moved no closer to a resolution over the weekend, all but extinguishing the prospects of a stimulus bill being written, voted on, and signed into law by President Donald Trump before the election. House Speaker Nancy Pelosi said she’s waiting for another counter-offer on Monday from Treasury Secretary Steven Mnuchin, as she and White House Chief of Staff Mark Meadows accused each other of “moving the goalposts” in negotiations. Much of the weekend was devoted to work by congressional committees with the goal of writing legislation, but aides in both parties said little progress was made despite the pledges from both sides that they want to quickly deliver $1,200 (89,000 INR) stimulus payments to most Americans along with aid to struggling businesses.

4. Europe Struggles to Regain Control from Second Covid-19 Wave

Europe took a step closer to the strict rules imposed during the initial wave of the pandemic, with leaders struggling to regain control of the spread while confronting growing opposition to restrictions. The Czech Republic — the European Union’s worst hot spot — and Poland signaled more curbs may be near, and Belgium is mulling a lockdown. AstraZeneca said its vaccine candidate produced a robust immune response in elderly people, while Johnson & Johnson said the first batches of its shot could be available in January. Both companies are resuming trials that had been paused due to safety concerns. U.K. Health Secretary Matt Hancock said his “central expectation” is there will be a vaccine to roll out in the first half of 2021. The World Health Organization’s director general said some countries in the northern hemisphere are facing a “dangerous moment.”

5. Dubai announces $136 million extra stimulus package

Dubai has announced a new 500 million dirhams (INR 1000 cr) stimulus package to support the local economy, taking Dubai’s total stimulus measures this year to 6.8 billion dirhams, the crown prince of the emirate said on Twitter on Saturday. “The private sector is a major partner in Dubai’s development process, and we have adopted a set of new exemptions for some fees and a reduction in rents for some sectors, as well as an extension of the validity of a previous set of exemptions from fees,” said Hamdan Bin Mohammed Al-Maktoum.

6. U.S. appeals WTO ruling on its multi-billion tariffs on China

The United States lodged an appeal on Monday against a WTO ruling last month that found U.S. tariffs imposed on China in 2018 breached global trade rules, a World Trade Organization (WTO) official said. A three-person panel had ruled that U.S. had not justified why the tariffs imposed after a Section 301 investigation against China were a justifiable exception to its obligations. The U.S. delegation, in a speech seen by Reuters announcing its appeal, said that the panel report “reflects a major, missed opportunity for the WTO to begin to address the most serious problem faced by every member that seeks a balanced and fair world trading system: namely, aggressive, state policies that seek to dominate broad industrial sectors.”

7. Fiat, PSA to win EU approval for $38 billion merger

Fiat Chrysler and PSA are set to win EU approval for their $38 billion (INR 2.8 lakh cr) merger to create the world’s fourth-largest carmaker, as they strive to meet the industry’s dual challenges of funding cleaner vehicles and the global pandemic. The green light from the European Commission would formalise the creation of Stellantis, a carmaking group that could tap hefty profits from selling RAM pickup trucks and Jeep SUVs to U.S. drivers to fund the expensive development of zero-emission vehicles for sale in Europe and China. The all-share merger announced late last year would unite brands such as Fiat, Jeep, Dodge, Ram and Maserati with the likes of Peugeot, Opel and DS.

8. Bond Defaults Deliver 99% Losses in New Era of U.S. Bankruptcies

Bankruptcy filings are surging due to the economic fallout of Covid-19, and many lenders are coming to the realization that their claims are almost completely worthless. While few could have foreseen the pandemic’s toll on the economy, the depth of investors’ pain from corporate distress was all too predictable. Desperate to generate higher returns during a decade of rock-bottom interest rates, money managers bargained away legal protections, accepted ever-widening loopholes, and turned a blind eye to questionable earnings projections. Corporations, for their part, took full advantage and gorged on astronomical amounts of debt that many now cannot repay or refinance. It’s a stark reminder of the long-lasting repercussions of the Federal Reserve’s unprecedented easy-money policies. Ultralow rates helped risky companies sell bonds with fewer safeguards, which creditors seeking higher returns were happy to accept. Now, amid a new bout of economic pain, the effects of those policies are coming to bear.

9. Jack Ma Wealth Surges Above Walmart Heirs’ With Record Ant IPO

Jack Ma, the former English teacher who co-founded Alibaba Group Holding Ltd. is poised to become the world’s 11th richest person after Ant Group Co. priced shares for a record IPO. Ma’s 8.8% stake is worth $27.4 billion based on the stock pricing in Hong Kong and Shanghai. That will take the 56-year-old’s fortune to $71.6 billion (INR 5.3 lakh cr) on the Bloomberg Billionaires Index, exceeding that of Oracle’s Larry Ellison, L’Oreal’s heiress Francoise Bettencourt Meyers and individual members of the Waltons, whose family own Walmart Inc. Ant’s mammoth listing is poised to boost the fortunes of a group of early investors and employees. The company has granted staff share-based awards since 2014 and at least 18 other people have become billionaires from the IPO.

10. Brexit decision entirely separate from U.S. election outcome

Britain’s decision on whether to agree a Brexit deal with the European Union is entirely separate to the outcome of the U.S. election next month, Prime Minister Boris Johnson said on Monday.

“The two things are entirely separate,” Johnson said, when asked about an Observer newspaper report that he was waiting to see the U.S. result before making a Brexit decision, and whether he was concerned about the prospect of a Joe Biden presidency.