BluSmart founders excelled in fraud, but what about OYO?

People are talking a lot about how BluSmart founders excelled in fraud. But what about OYO?

In 2019, Ritesh Agarwal personally bought back around $1.5 Bil worth of OYO shares from early investors (like Sequoia & Lightspeed) through a Cayman Islands entity called RA Hospitality Holdings. That debt ($1.2 billion of which was financed via debt from Japanese and international banks) was reportedly guaranteed by SoftBank, which was already a major investor in OYO via its Vision Fund.

In that transaction, Softbank played both sides of the trade:

It guaranteed Ritesh's loan to facilitate the deal, while also benefiting from the pump in valuation being the largest shareholder and board influencer.

Solely because of that transaction, OYO's valuation had reached $9.6 Bil. This is like me taking a loan to buy my company's shares at an inflated valuation, just so I could pump up the ponzi to later dump it on people. However, it gets even more interesting.

At the time, reports said that "Ritesh personally borrowed ~$1.2 billion from a consortium of banks, while the remaining ~$300 million came from his own equity and funds."

But how did he get $300 Million? He never had that kind of money. That's a joke.

It was basically a leverage play on his existing shares, routed through an offshore Cayman entity, essentially leading to a Book-entry equity injection of his shares counted again in new form. Typical shady financial engineering business.

And then began the attempts of dumping this ponzi on retail investors.

In 2021, OYO tried to IPO at a $12 Bil valuation. This was brought down to $10 Bil, before the whole plan eventually got stalled.

Then in Aug 2022, the valuation was dialled back to $7-8 Bil, because the whole company was looking at going for a toss if it didn't inject money ASAP to cover for the looming expenses.

In Oct 22, DHRP addendum was filed, and the company got the SEBI approval by March. What happened? The valuation estimates were now at $5-6 Bil. The IPO was cancelled.

Then came January 2024, where the company's valuation was marked at $2.5 Bil in an emergency liquidity injection situation. It raised some $35 Mil to prevent itself from going totally bust.

Now the company is again trying to IPO ASAP. Why? Because its loans' repayment dates are approaching. Both the founder's Ponzi loans (which haven't been repaid ever since they were taken in 2019), and also the Term Loan B (which were taken at the company level to make the Motel acquisitions) depend on the IPO going through in Oct 2025.

What if OYO's October IPO fails? Well, then the company's doomed. And all the debt and circular transactions will come back to bite its rear. And hard.

But the question isn't whether OYO's October IPO fails or succeeds. The question is this:

What if its 2021 IPO had succeeded?

If that IPO would have gone through, EVERYONE who invested in that IPO would have been trapped in a PayTM like situation. And these people knew that.

They're frauds, too.

BluSmart, OYO, and intricate financial engineering feats.

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