paytm share buyback, Paytm Buyback: First investors lost money, now company is considering share buyback; Paytm share price stocks climb the most in a week after buyback proposal news
Beneficial to shareholders
A board meeting will be held on December 13 to decide on the buyback, Paytm informed the stock exchange in a regulatory filing. The management of the company is of the view that the buyback could be beneficial for the shareholders considering the current cash and financial position of the company. Also, if the proposal is approved by the board, this will be the company’s first buyback.
The stock fell 75% from its IPO price
Paytm’s shares were listed on the market in November 2021. The company had issued an IPO at a price of Rs 2,150 per share. But since the listing of the stock, the process of decline is going on. Also, after the end of the lock-in period, the share fell from Rs 2,150 to Rs 440. That means the stock has fallen below about 80 percent of the IPO price. The company has a cash reserve of Rs 9,000 crore, through which the buyback will be done.
The stock is currently trading at Rs 531, up 4.62 percent on the news of the buyback. But it is still 75 percent below the issue price. The market cap of the company was earlier Rs 1.39 lakh crore which now stands at Rs 34,473 crore. That means the investors have suffered a loss of Rs 1.05 lakh crore. Now, surprisingly, Paytm, which is selling shares at Rs 2,150, is preparing to decide to buy shares from investors at a cheaper price.
What is share buyback?
Usually investors buy shares of a company and invest in it but buyback is the opposite. The company buys shares from the investor at a fixed price. The reason for this is that the company has excess cash, which the company uses for its own growth or, if not usable, increases its stake by buying shares from investors with the help of the excess cash. Note that this benefits the company as well as investors.