Meesho, LG Electronics, Tata Capital and more to see high share price volatility this week; Here’s why

Synopsis: This week, around Rs 14,000 crore worth of equity would become freely available for trading  as a number of unlock dates expire for Meesho, Tata Capital, and LG Electronics India, among others. Although this unlock would not signal a start to immediate sales, the sudden increase in the free float may cause short-term volatility in the already listed stocks.

This upcoming week might be a volatile one for a number of recently listed stocks, as a string of IPO lock-in periods expire, releasing shares worth almost Rs 14,000 crore into the market. Though these expiries do not necessarily portend immediate selling, they significantly increase the free float and often drive near-term price action. With household names like Meesho, Tata Capital, and LG Electronics India in the mix, investor focus will be   on how the market absorbs this potential extra supply.

Why will this week be volatile?

Several stocks, which have floated their initial public offerings in recent times, are likely to see more frenetic action in the coming week as shares aggregating to close to Rs 14,000 crore become tradable consequent to the end of shareholder lock-in periods. These unlocks, however, do not constitute an actual sale but a potential supply, but they can create near-term volatility because they increase the base of tradable equities.

Lock-in ends as per the week. 

Today, January 5, we witnessed a spate of mid- and small-cap names witnessing sizeable unlocks. Sambhv Steel Tubes had seen 48% of its equity unlocking, which are shares worth Rs 1,385 crore. Globe Civil Projects had seen an unlock of 51% equity worth Rs 185.2 crore. On the other hand, Brigade Hotel Ventures has seen 4%, worth Rs 96 crore, unlocked. Other smaller unlocks will be Advance Agrolife, which has also opened 4% worth Rs 351 crore, and Om Freight Forwarders, unlocking 2% worth Rs 5.6 crore.

On Tuesday, January 6, 10.4 million shares of WeWork India, or 8% of its outstanding equity, will become tradable. At current prices, the stake is valued at Rs 637 crore and is one of the notable early-week unlocks.

However, the focus will be on Wednesday, January 7, as significant IPO lock-ins will expire. Meesho will have unlocked shares of 109.9 million, which is 2% of its equity, valued at Rs 1,973 crore. Additionally, Tata Capital will have unlocked shares of 71.2 million, which is 2% of equity, valued at Rs 2,573 crore. Aequs will have unlocked shares of 2%, valued at Rs 230 crore, along with Vidya Wires, which has unlocked shares of 4%, valued at Rs 44 crore.

It’s likely that Thursday, 8th January, will be an unusually turbulent day, beginning with shares of LG Electronics India, in which 15.2 million shares, or 2% of their capital, worth Rs 2,252 crore, will become eligible for trade. The highest unlock of the week belonged to Crizac, in which 60% of its total shares, worth about Rs 2,968 crore, would be unlocked.

The week ends on Friday, January 9th, with Nephrocare Health opening the lock-in period on the unlocking of 2% equity worth Rs 90 crores. Bansal Wire Industries will see their lock-in period open on the unlocking of 20% equity valued at Rs 973 crores.

Thus, while these unlocks tend to enhance the free float and may result in market pressure or volatility, at least in the short term, their actual market effect would also largely depend on the behaviour of the shareholders, who are probably keeping a close watch on these dates.

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