The year 2022 was undoubtedly a financially stressful year and a few startups and unicorns contributed a lot to the stress. Here are three significant events that have sent shockwaves through markets:
Nykaa bonus issue
Bonus shares refer to the free shares given to the existing shareholders in a particular ratio approved by the Board of Directors of the company. It is issued primarily to increase retail participation when the share price is very high, making it difficult to buy shares.
The Nykaa bonus issue became a controversy because of the date of the announcement. The lock-in period ended on 10th November and the bonus issue was announced on 11th November. Lock-in period is the period during which investors cannot sell the shares.
Nykaa's bonus share announcement was considered a ploy of management to restrain the investors from selling their shares as lock-in ended. Investors who entered the market at the high price of IPO now see it as the management trying to reduce the prices of shares by issuing bonus issues to increase retail participation, which is considered unfair to the IPO investors.
The share price of the company has wiped out more than 70 percent of the wealth of investors since listing.
On 9th December, 2022, Paytm announced a buyback of the shares, which means the company is ready to buy its own shares from the shareholders.
Buyback of the shares generally shows that the company has a good financial position which motivates investors to hype the prices.
However, Paytm's buyback announcement surprised investors and analysts because it was unclear as to how the loss-making company would actually buy back its shares.
"In Paytm's case, the company continues to report cash losses annually. Therefore, the buyback is essentially a return of equity capital to its shareholders," Proxy advisory firm IiAS said.
Buyback drives Paytm into a more controversial scenario rather than improving its share price.
It was also alleged that Paytm was sharing information about the account holders with entities based out of China.
You must have been aware of listing of shares but delisting of shares is not very common in the stock markets. Elon Musk acquired the microblogging platform Twitter and got the company delisted from the New York Stock Exchange (NYSE).
The shareholders of Twitter were offered $54.20 per share to buy back shares to own the shares of the company privately and end the public ownership.
Anushka Trivedi is a freelance financial content writer. She can be reached at anushkatrivedi.com