IPO-Bound OYO Draws Criticism Over Controversial Bonus Share Ballot
A fintech founder has raised concerns about a potential “daylight heist” by hospitality chain OYO Rooms, alleging that retail investors are being “short-changed” by the company’s promoters.
In a post on X on Friday, financial expert Mohit Garg said that on Oct. 27, OYO sent out a postal ballot with three proposals: increasing authorised capital, issuing bonus CCPS (Compulsorily Convertible Preference Shares), and granting sweat equity.
The Controversial Bonus Share Ballot
“Normally, whenever you are a retail shareholder, you would tend to ignore such postal ballots & emails from companies. Which is exactly the intention of this one – that one ignores the mail and does not take action upon it,” the post alleged.
The controversial point about OYO’s postal ballot is the bonus CCPS issue. According to the X post, investors had only three days to respond and the CCPS are structured to favour insiders.
“Class A (Default): 1 CCPS → 1 share. (if you do nothing, ignore or miss the mail – you get 1 CCPS, which eventually converts to 1 equity share for every 6,000 shares). Class B (Opt-in):
If they are able to appoint ‘Merchant Bankers for IPO in this FY 25-26’ → 1 CCPS → 1,109 shares. (So, one gets an additional 1109 bonus shares for every 6000 equity shares held now),” Garg’s post explained.
How Retail Investors Are Being Short-Changed
He added that most retail shareholders end up with Class A shares, gaining little. On the other hand, promoters and large investors who opt for Class B could get a huge bonus if Merchant Bankers are appointed for a future IPO.
“Now, only people who will know this & control this are promoters and senior folks in OYO. What an idea sirji.. let common investors ignore this message. Only promoters and large institutional holders apply for this Class B. They appoint Merchant bankers at their whims and corner a large pool of shares for free,” Garg further slammed OYO in the post, calling the efforts “classic daylight corporate heist.”
He concluded the post, urging retail investors to stay alert and question such opaque practices.
Expert Reactions and Warnings
As the post went viral on social media, Capitalmind AMC CEO Deepak Shenoy also echoed his concern, warning shareholders to stay vigilant.
Please be aware if you are a shareholder.
OYO plans to file its Draft Red Herring Prospectus (DRHP) in November, eyeing a $7-8 billion valuation for its IPO.
On the issue of CCPS issuance, news agency PTI earlier cited a source saying that OYO is framing the move as a strategic step to prepare for an IPO, aiming to streamline its capital structure.
“These actions are part of a multi-pronged IPO structuring effort, aimed at simplifying PRISM’s capital structure, rewarding existing shareholders, and aligning governance with public-market expectations. The proposal suggests that the IPO filing preparations are now at an advanced stage,” PTI cited the source as saying on Thursday.
Understanding the Impact on Retail Investors
Retail investors in India should be cautious of such practices and stay informed about the companies they invest in. It is essential to understand stock market terminology and be aware of the rights of shareholders to make informed investment decisions.
Staying Ahead in the Indian Stock Market
To stay ahead in the Indian stock market, it is crucial to stay updated with the latest stock market news and trends. Retail investors can also consider investing in index funds or diversifying their portfolio to minimize risk.
Conclusion
In conclusion, the controversial bonus share ballot by OYO Rooms has raised concerns among retail investors in India. It is essential for investors to stay vigilant and informed to avoid being short-changed by such practices. By staying updated with the latest stock market news and trends, retail investors can make informed investment decisions and stay ahead in the Indian stock market.