While the lock-in period for Nykaa’s pre-IPO investors was set to expire on 10 November, Nykaa declared a 5:1 bonus share issue, just ahead of a widely anticipated selloff in the stock. The pre-IPO investors held over two thirds of FSN E-Commerce Ventures shares, at about 310 million shares. The lock-in period ensures that initial investors, promoters or even employees cannot liquidate or sell their shares for a certain period following the listing of the company on the bourses.
The bonus issue ensures that every investor of the e-commerce platform will receive five additional shares for every share they hold, diluting the price of the stock by a sixth. The record date to determine which shareholders are eligible to receive the bonuses has been set for today, 11 November. Does that mean that those who purchase shares today are eligible to receive five additional bonus shares?
Also read: Govt to scrap incentive plan for services exporters
Unfortunately not. The record date was first set to 3 November, and was later revised to 11 November; while the stock turned ex-bonus on 10 November. Nykaa’s release of bonus shares on the same day as the expiry of the lock-in period boosted investor sentiment, negating the fears of the high sell-off.
On an average, bonus shares often take about 15 days to be credited into the owner’s DEMAT account, although it varies from company to company. The investor sentiment once the shares land into their accounts remains to be seen. The lower price, following the ex-bonus date, will also encourage the reduction of the concentration of FSN E-Commerce Ventures shares, encouraging more retail investors to invest in the company as pre-IPO and larger investors shed their shares.
Today, the sentiment for Nykaa’s shares has turned positive, the stock price is being held firmly in the bulls’ grip. Investors such as Aberdeen Standard Asia Focus, Norges Bank and other large investors bought about 2.5% equity in the company yesterday, and the stock has surged over 12% today, hitting an intraday high of Rs 224. However, shares of the company have slipped 46% below their initial listing price.
