Meesho shares slide 21% in 3 days, after more than doubling in post-IPO surge. What’s behind the decline?

Shares of newly-listed e-commerce platform Meesho slid 21% over the past three trading sessions, falling to Rs 185.25 on Tuesday, after a breathless post-listing rally that had more than doubled the stock from its IPO price in just over a week. The sharp reversal has left investors wondering if this is merely the air coming out of an overheated trade, or the start of a deeper reset?

Meesho shares fell as much as 8.3% on Tuesday to Rs 185.25 on the BSE. The stock is now down 21.3% from its December 18 closing price of Rs 235.50, marking three straight sessions of decline. Meesho closed 4.7% lower on Friday, December 19, followed by a 10% drop on Monday, before extending losses on Tuesday.

From euphoric debut to sharp reversal

The selloff follows an extraordinary start to Meesho’s life as a listed company. The stock debuted at Rs 162, a 46% premium to its Rs 111 IPO price, and ended its first session near Rs 170. The Rs 5,000-crore-plus offering was subscribed 79 times overall, with retail investors alone bidding 19 times the shares on offer.In just seven trading sessions after listing, Meesho surged nearly 110% over its issue price. That rally, however, came with structural stresses. The sharp move triggered a short squeeze, forcing more than one crore shares into the exchange auction mechanism after several short sellers failed to deliver stock for settlement. With a free-float of roughly 6%, even modest imbalances between demand and supply translated into outsized price swings.

Low free-float IPOs have increasingly shown such volatility. A similar episode played out last month with Groww, where an 89% surge, combined with limited supply, pushed 30 lakh shares into auction. Since listing, Meesho’s rally has created over Rs 50,000 crore in investor wealth, wealth that is now being tested by the pullback.

Brokerages on Meesho

Global brokerage UBS had initiated coverage with a ‘Buy’ rating and a target price of Rs 220, citing the company’s asset-light model, negative working capital cycle and consistent cash flow generation.UBS expects Net Merchandise Value to grow at a 30% compound annual rate over FY25–30E, driven by a sharp expansion in annual transacting users, from 199 million to 518 million, and higher ordering frequency, even as average order values moderate from Rs 274 to Rs 233.

Choice Institutional Equities also struck an optimistic note, saying that “Meesho is best placed to monetise this shift via its zero-commission, low-AOV, discovery-led platform serving Tier-2/3 users. Long-tail depth, content-led demand and logistics integration enable superior unit economics, with rising ad/fintech/fulfilment monetisation makes Meesho the most leveraged play on the next 100–150Mn mass-market users.” The brokerage set a target price of Rs 200, implying an 80% upside from the IPO price.

The recent selloff has cooled the stock’s early euphoria, but analysts say it does little to alter the core investment thesis. Strong demand, high engagement among Tier-2 and Tier-3 users, and positive analyst coverage continue to underpin the long-term narrative.

The immediate question is less about fundamentals and more about positioning: how much of the post-IPO surge was driven by scarcity, short-covering and speculative demand and how much downside remains as those forces unwind.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)