InvestorQ : Why did the stock of Paytm fall so sharply in trading on Friday?
prachi Patwardhan made post

Why did the stock of Paytm fall so sharply in trading on Friday?

sara Kunju answered.
1 month ago

On Friday, the stock of Paytm (One 97 Communications is the name of the holding company) fell sharply by 6.2%. The sharp fall came after proxy advisory firms opposed the reappointment of Vijay Sekhar Sharma as its MD and CEO. In fact, the proxy firms urged the shareholders to vote against the proposal to reappoint Sharma as the MD and CEO of the company. The objections were raise by three of the major proxy firms in India viz. IIAS, Shareholder Empowerment Services (SES) and InGovern.

There are different reasons for which the proxy firms had urged shareholders to vote against the proposal, but the gist can be captured as under. The proxy firms have raised objections to the dual posts of CEO and MD held by Sharma, who is also the founder of the company. The proxy firms also called for the removal of Sharma and the induction of a professional manager to arrest the sharp fall in the stock price post listing. They also expressed concerns over the delay by Paytm in meeting its operating profit commitments.

However, these can be slightly debatable. Digital business is of a nature where it is hard to make clear cut projections. Even Amazon and Twitter have taken much longer to turn to profits. Also, this time it does look like the proxy firms are exceeding their brief and trying to play the role of activists rather than just advising the shareholders to vote.