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Nithin Kamath, CEO of Zerodha, calls the recent drop in the stock prices of new-age technology companies

Nithin Kamath, CEO of Zerodha, has expressed his concern about the sharp drop in the share price of publicly traded new-age technology companies around the world, calling it “quite scary.” Only some of the fallen tech stocks may recover, according to Nithin Kamath, who is known for posting his observations on the stock market and business trends on Twitter. “The sharp declines in the stock prices of publicly traded new-age technology companies around the world are quite concerning. Only a small percentage of them will probably bounce back, if history is any guide,” the Zerodha CEO said on Twitter on Saturday.

Paytm, Nykaa, and others are in the red.

Recently, new-age companies such as Zomato, Nykaa, PolicyBazaar, Caretrade, and Paytm have listed on domestic markets. Only Zomato trades above its initial public offering (IPO) price, while the rest have fallen well below it. Cartrade tech’s stock price has plummeted by nearly half since its IPO. Paytm, the largest IPO Dalal Street has seen to date, is down nearly 40% from its IPO price. Nithin Kamath’s prediction that only a small percentage of these will recover adds to IPO investors’ concerns that their investments have lost a significant amount of value.

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Strive for less volatility.

When it comes to growth projections, Nithin Kamath advises new-age companies to prioritise lower long-term volatility over maximum short-term gain. According to Kamath, companies should aim for lower stock price volatility, which would be beneficial to long-term investors. “When companies are mostly valued based on what they project, it may be better to talk down the price rather than up the price, which may seem counterintuitive. Lower stock price volatility is also something companies should strive for, as it benefits long-term investors,” he said.

Nithin Kamath

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The net worth of the core teams in most new-age businesses is tied to ESOPs, and thus valuations, according to the Zerodha co-founder. “Anchoring bias affects the majority of people, including the founders. “It doesn’t matter how large the notional profits on stock holdings are; if the price reaches a high and then falls, it feels like a loss,” he explained. Sharp changes in the team’s net worth can’t be good for morale and focus, and by extension, for the business.

Even in the United States, well-known internet companies have suffered losses. Netflix has lost more than 8% of its value in December, while Twitter has lost 2%, and Elon Musk’s Tesla has lost 18% of its value.

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