The stocks were sold over the 6-month period from Sep24 to Feb25 to settle a financial obligation from a 2019 rights issue that’s been misunderstood or overlooked in the chatter.
And basis my experience, this is where the problem is - 99.99% of Indian literati writing and commenting on the company and founders don’t know what a RIGHTS ISSUE is.
So, let’s understand the situation in depth.
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In 2019, Urban Company needed capital to fuel its growth.
To raise funds, it offered existing shareholders, including the founders, a chance to buy more shares through a rights issue.
Think of it as the company saying, “If you already own a piece of us, you can buy more to maintain your stake.”
These shares were partly paid-up.
Thus, the founders paid a portion upfront (say, Rs 25 for a Rs 100 share) and agreed to pay the rest later, leaving them with a debt to the company for the unpaid amount (Rs 75 per share in this example).
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Fast-forward to now, as Urban Company gears up for its IPO. There’s a key requirement: All shares must be fully paid up before going public.
For that, the founders need to clear the remaining debt from the 2019 rights issue. And for that, they needed a lot of cash.
Their solution? Sell some of their existing shares in secondary deals to private investors, raising Rs 260 crore each - totaling Rs 780 crore.
And in effect, the money went back to the company.
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This makes it super clear - This wasn’t about “cashing out” or abandoning ship.
Urban Company’s founders - Abhiraj, Varun, Raghav - still hold substantial equity, keeping them deeply invested in the company’s success.
And now, just tell me - Upon reading this, does this sound like they are cashing out because the company’s post-IPO horizons are likely to be negative?
It may be. Maybe not. But, does it come out that the founders selling the stake from Sep24-Feb25 has anything to do with any of that?
I don’t think so. What do you think?
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