Meesho Stock Drops 21% After IPO Surge: What Retail Investors Should Know

Meesho’s shares have tumbled 21% over the last three trading days, slipping to about Rs 185.25 after a rapid rise that more than doubled the stock from its IPO price in just a week.

What Triggered the Drop?

On Tuesday the stock fell as much as 8.3%, marking the third straight session of loss. It is now down 21.3% from the closing price of Rs 235.50 on Dec 18.

How the IPO Played Out

• The IPO was priced at Rs 111 per share.
• On the first day of trading the stock opened at Rs 162, a 46% premium, and closed near Rs 170.
• In just seven sessions the share price surged nearly 110% above the issue price.
• The offering attracted huge demand – it was subscribed 79 times overall, with retail investors bidding 19 times the supply.
• Only about 6% of the shares are free‑float, making the stock highly sensitive to buying and selling pressure.

Why the Price swung Wildly

Because of the low free‑float, a short‑covering rush pushed many shares into the exchange’s auction system when short sellers couldn’t deliver the stock on settlement day. This short squeeze amplified price swings, similar to what happened with other low‑float IPOs like Groww.

Analyst Take on the Situation

Despite the recent pullback, analysts still see a strong long‑term case for Meesho.

• UBS gave the stock a “Buy” rating with a target of Rs 220, citing the company’s asset‑light model and steady cash flow. It expects net merchandise value to grow at a 30% compound annual rate through FY 2025‑30, driven by a jump in active users from 199 million to 518 million.
• Choice Institutional Equities set a target of Rs 200, highlighting Meesho’s focus on Tier‑2/3 customers, zero‑commission platform, and growing revenue from ads, fintech and fulfillment services.

What This Means for Retail Investors

The recent sell‑off appears to be a correction after an over‑heated rally rather than a fundamental shift in the business. Investors should consider:

• How much of the recent rise was due to scarcity and short‑covering versus genuine demand.
• Whether the stock still offers upside relative to its IPO price and analysts’ targets.
• Their own risk tolerance, given the stock’s volatility caused by a low free‑float.

Remember, this is perspective, not a prediction. Do your own research and assess how the stock fits your investment goals.