Walmart Stock Plummets After Acquisition of Flipkart

Walmart Stock Plummets After Acquisition of Flipkart

In an attempt to make a move on India's growing e-commerce market, Walmart has agreed to buy a majority stake in Flipkart. Even though the prediction of the results from the $16 billion deal is strong, the Walmart stock initially fell.

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Flipkart is the leading e-commerce business in India, and some analysts predict that the site has the potential to become the Indian version of the Chinese e-commerce giant Alibaba. However, at this point and time, Flipkart doesn’t have enough leverage to compete with other international e-commerce giants, a situation that Walmart is now looking to take advantage of.

Walmart has announced that they are buying 77 percent of the Indian company for a $16 billion price tag and Walmart CEO Doug McMillon is especially excited about the deal.

“India is one of the most attractive retail markets in the world, given its size and growth rate, and our investment is an opportunity to partner with the company that is leading transformation of e-commerce in the market,” McMillon stated in the official company statement regarding the acquisition.

Investors Don’t Share the Excitement

Even though McMillon and Walmart’s management are excited about the deal, shareholders have raised concerns. The main issue with the deal is that it can lead to short-term losses for Walmart. That doubt was enough to start a sell-off that saw the Walmart stock drop by 3,5% immediately after the deal went public.

That being said, most shareholders agree that the deal is a long-term positive and that it will give Walmart the ability to compete with Amazon in one of the fastest growing industries in the world.