Nykaa shares tumbled today after the one-month lock-in period for shares allotted to anchor investors in the public issues ended Wednesday. The shares of FSN E-Commerce Ventures declined as much as 5 percent to Rs 2,028, but later recouped much of the losses. At 11:45 IST, it was down half a percent to Rs 2,133.
Nykaa had raised around Rs 2,400 crore by selling over 2 crore shares to 174 anchor investors before the issue opened. Following a stellar response from all classes of investors, the shares listed at double the issue price.
The ending of the lock-in period does not mean all the anchor investors will sell out. But technically, all shares allotted to anchor investors can come into the system, increasing the supply of shares available. Some traders short sell just before the lock-in ends, hoping to buy back the shares if it declines due to selling by anchor investors. But if anchor investors do not sell the shares, the stock will rebound quickly. Sustained weakness from the last day onwards of the lock-in could mean some anchor investors have decided to sell.
In December, the lock-in period of 10 stocks will get over. These stocks are One97 Communications (Paytm), FSN E-Commerce Ventures (Nykaa), Sapphire Foods (franchisee of Yum Brands that owns KFC and Pizza Hut), PB Fintech (PolicyBazaar) to name a few.
| Stocks | Lock-period ends |
| FSN E-Commerce Ventures | Dec-08 |
| Fino Payments Bank | Dec-09 |
| SJS Enterprises | Dec-10 |
| Sigachi Industries | Dec-13 |
| PB Fintech | Dec-13 |
| One97 Communications | Dec-13 |
| Sapphire Foods | Dec-16 |
| Latent View Analytics | Dec-20 |
| Tarsons Products | Dec-23 |
| Go Fashion | Dec-27 |
Who are anchor investors?
Anchor investors are qualified institutional investors, like sovereign wealth funds or mutual funds. They also belong to the QIB category of the IPO. But the price of the shares allotted to them is decided separately.
Companies rope in anchor investors usually a day before the IPO opens to create a demand for the company's shares. Every anchor investor has to invest a minimum of Rs 10 crore in the issue.
Why do companies rope in anchor investors?
The higher the money company raises via anchor investors, the healthier demand is considered for the shares of those companies. So, these investors boost the prospects of the success of an IPO.
Retail investors look closely to these anchor investor numbers since they attest to the credibility of an IPO.
What is the lock-in period?
While anchor investors buy the shares before the issue opens for other investors, they cannot sell the shares until 30 days after the listing. This period of thirty days is called a lock-in period.
Why are anchor investors supposed to keep the funds locked in?
The lock-in period prevents a major fall in the share price post-listing. So, if institutional investors put in the money for listing gains, they cannot do so within the initial thirty days and hurt the share price.
How does it impact stocks?
Historically, shares come under pressure a month after the listing, because usually some of the anchor investors may choose to sell. This could be for a variety of reasons, and not necessarily a reflection of the company’s fundamentals. For example, Zomato shares had declined 6 percent on the day the lock-in period ended.
(Edited by : Santosh Nair)
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