One key reason Zomato witnessed a sharp selloff at time of acquiring Blinkit was actually its shareholding pattern!
Year 2022 was a nightmare for many tech funds globally. After enjoying the boom in 2020-21, many faced their sharpest drawdowns in 2022-23. As a result, many were eager to exit their investments in developing markets to reduce their risk and create liquidity back home.
Two of those funds were actually – SoftBank Group Corp. & Tiger Global Management, who collectively owned ~65% of Grofers (now Blinkit!)
The acquisition was an all-equity deal, where Grofers’ shareholders were awarded listed Zomato shares. This was seen as an easy exit for Grofers’ backers, as the company was far from going public, and most big VCs were unwilling to inject more funds to combat rising competition or buyout their stake. Roughly 63 crore new shares were issued leading to 8% dilution for Zomato’s exiting owners.
The markets had already anticipated that these shares would get dumped by the funds as soon as the regulatory lockin period by SEBI post acquisition gets over – which would further add to the free float. That’s exactly what happened as today both Softbank & Tiger Global are no longer shareholders of Zomato.
Hence they gave a thumbs down to the deal!
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