MUMBAI: Well-known companies slated for public listing have been hit by surprise lawsuits and complaints from former insiders and sellers alleging breaches of contract and non-payment of fees, creating uncertainty about their initial public offering (IPO) schedules and raising doubts their share performance after listing. Companies believe these are attempts to create hurdles in their IPO plans and twist them to agree to an agreement.
For example, Paytm’s $ 2.2 billion initial public offering is facing an unusual hurdle – a 71-year-old former director has urged the Indian regulatory agency to stop the offer, claiming he is a co-founder who died two years ago Invested $ 27,500 in decades but never received shares, Reuters reported on Friday.
In legal documents reviewed by Reuters, Paytm said allegations by Ashok Kumar Saxena and allegations of fraud in a complaint filed with the New Delhi police force were a mischievous attempt to harass the company. The dispute was quoted by Paytm in its IPO prospectus under the criminal proceedings section.
Saxena has reached out to the Securities and Exchange Board of India (Sebi) to stop the IPO, arguing that investors could lose money if its claim turned out to be correct, Reuters reported.
“There are no ongoing legal proceedings or police investigations against the founder and the company or any of its subsidiaries in this matter. The company has not received any notification from Sebi on this either. The company believes that this issue has no merit and that it will not affect its IPO in any way, “said one person, aware of the development, speaking on condition of anonymity.
An email sent to Paytm went unanswered.
The cement business of the Nirma Group, Nuvoco Vistas Corp. Ltd, had a similar surprise last week, just prior to opening its Rs 5,000 billion initial public offering on August 9th.
A seller of the company filed for bankruptcy against the company with the National Company Law Tribunal (NCLT) in Mumbai, alleging that a contribution of over Rs.5 billion had not been paid. The seller also shot a letter to Sebi and the stock exchanges against the company’s IPO, citing the pending bankruptcy filing with the NCLT.
“The release of open payments to the seller is subject to the submission of evidence of the statutory duties and the final comparison in accordance with the buyer’s order conditions to ensure the seller’s statutory payments by requesting documentary evidence of compliance with statutory liability by the seller “Otherwise the obligation falls on the company.” said a spokesman for Nuvoco Vistas. Outstanding payments can be released if the seller provides the relevant receipts and the invoices are certified in accordance with the order conditions.
“We have also received no notification from NCLT on the matter,” he added.
“Since the amount is much lower than the materiality threshold of 37 million rupees, which was set under the guidelines for promoting existing standards, we have not disclosed this in the prospectus,” said the spokesman.
According to industry insiders, these aren’t the first IPO-tied companies to face such last-minute lawsuits. In the past, companies like Quickheal Technologies and Prince Pipes and Fittings have had similar disputes when they went public. In Quickheal’s case, the dispute had a significant impact on the company’s shares after its listing.
“The IPO is a high profile and very sensitive event for any company and we have seen in many cases that various parties are currently filing lawsuits or complaints with regulators to resolve old pending disputes or personal grievances. Given the very public nature of an IPO, these disputes are clearly highlighted. And if those disputes arise right before the IPO and listing, then it has a significant impact on the price of the stock. Sometimes these cases are just a mischievous attempt to twist the company for a cash settlement or just to do some publicity, “said an investment banker who advises on IPOs and speaks on condition of anonymity.
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