Shares of Zomato have fallen 22% in the last two days, wiping out more than ₹9,000 crores in capital assets. Zomato is a leading food delivery service, the only listed one, while its rival Swiggy is still unlisted. According to data obtained from exchanges, there was a huge volume of trading as soon as the markets opened on July 25. Shares of Zomato have fallen more than 10% during this time. While sales volumes later declined, the stock continued to fall.
So why exactly did Zomato stock tank 22% in two days?
Shares of Zomato plunged today as the investor lock-up period ended on July 25. Up to 613 million crowns of shares, blocked from the initial public offering (IPO) in July 2021, are now freely tradable. This is not the first time that the investor lockout period has ended for Zomato. In August last year, the company's shares fell 8% when the lock-up period for anchor investors ended.
Now the lock-up period is over for the promoters and employees, and, likely, many of these shareholders have probably reduced their stake. According to market data, Zomato stock has seen volumes of 64.5 million in the last two days.
What is the investor lock-in period?
As the name explains, a lock-in period is when shareholders cannot sell their shares. Lock-up periods are essential to prevent extreme volatility in the stock immediately after its IPO, giving the company enough time to build its business model and demonstrate its strength in the market. Different classes of investors have different lock-in periods. For example, Zomat's anchor investors had a 30-day grace period that ended in August last year. The lock-in period for promoters and employees ended a year after Zomato shares went public.