PB Fintech’s founders selling more than 20% of their holding to raise funding to pay taxes. Wrong timing.

Target Date - February 11, 2022

The founders Yashish Dahiya and Alok Bansal are together selling 2.3% of their stake into the Company.

Key points to note –

  • After sale, the founders’ cumulative stake will reduce from 10.33 % to 8.01% percent on a fully diluted basis.
  • Sale will be executed on February 11, 2022 through block deal.
  • Expected realisation from stake sale is about Rs 1000 crore.
  • Sale is supposedly to help founders raise finances for paying taxes related to ESOPs that are due.

The reason for sale seems fine. However, the issues are –

  • The subject sale means founder are selling more than 20% of their current shareholding that is significant.
  • New age companies like PB Fintech, Zomato, Paytm have seen significant fall in their stock prices post listing due to the uncertain path towards profitability. For ease of reference, PB’s share has already corrected by 50% from the top in the last 3 months. Therefore, promoter reducing stake during these times is bound to raise further concerns.
  • Why not to raise funding through pledge instead of selling?
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