Meesho's shares tumble 23% in 3 days: Should you hold?
What's the story
Meesho, the newly-listed e-commerce platform, has witnessed a major drop in its stock price. The company's shares have fallen by a whopping 23% over the last three trading sessions. Today, the stock was down as much as 8.41% to ₹185.05 on the BSE. The decline comes after a post-listing rally which had more than doubled from its IPO price in just over a week.
Market debut
Stock performance post-listing
Meesho's stock debuted at ₹162, a 46% premium to its IPO price of ₹111. The company's ₹5,000 crore-plus offering was subscribed by 79 times overall, with retail investors alone bidding 19 times the shares on offer.
Volatility
Short squeeze and its impact on Meesho's stock
The sharp move in Meesho's stock triggered a short squeeze, pushing over one crore shares into the exchange auction mechanism after several short sellers failed to deliver stock for settlement. This has led to high volatility in the market. With a free-float of around 6%, even modest imbalances between demand and supply have resulted in outsized price swings.
Outlook
Analyst ratings and future prospects for Meesho
Global brokerage UBS has given Meesho a 'Buy' rating with a target price of ₹220. The firm expects Net Merchandise Value to surge at a 30% compound annual rate over FY25-30. Choice Institutional Equities also remains optimistic about the company, setting a target price of ₹200, implying an 80% upside from the IPO price. Despite the recent selloff, analysts say it does little to alter the core investment thesis for Meesho's stock.