Dear Rundown Reader,
Amazon vs. Walmart.
This is high stakes stuff.
$16 billion to sit at the table. Much more money up for grabs.
Walmart’s in the process of completing its largest acquisition ever in a move aimed squarely at Amazon.
From a long-term perspective this looks like a great acquisition.
But people are fickle and Walmart shares dropped sharply after the announcement.
Today we explain why, and offer up our own take on Walmart’s latest power play.
Your Rundown for Thursday, May 10, 2018…
Walmart’s $16 Billion Power Play
Walmart (NYSE: WMT) announced Wednesday it is buying Indian e-commerce giant Flipkart.
The deal will cost WMT $16 billion and will give them a 77% stake in Flipkart, according to Reuters.
More importantly, the acquisition is a clear move to further buffer the company from Amazon’s influence.
According to Forbes, its “Walmart’s biggest deal ever and also one of the most successful exits by an Indian startup.”
The heated e-commerce battle for U.S. dollars has grown long in the tooth and now has shifted to emerging markets.
Amazon has already established key beachheads in India, one of the world’s largest emerging markets.
It would seem natural that WMT does the same. And it would seem this acquisition is great news.
After all, “Flipkart is the third most funded private company in the world,” according to Forbes.
But folks are fickle.
Short-term traders started selling after the news broke. Fears that the $16 billion price tag for Flipkart would eat up too much of WMT’s cash reserves reigned supreme.
Shares fell 3% Wednesday and WMT’s chart for the week looks like its stock fell off a cliff.
But a 77% stake in a company that a billion people love… How can that be bad?
And Flipkart has already proven it can hold its own against Amazon on its home turf.
A Quartz report notes, when it come to “electronics and mobile phones, Flipkart and Amazon are almost neck-to-neck.”
The report also notes that “Flipkart has held its ground and managed to become a leader in the lucrative online fashion and lifestyle category.”
That’s even bigger.
We have to wonder what people don’t like about this move.
Short sellers won this battle, with the stock falling over 5% since Monday’s open.
But folks playing this deal for the long-term should win the war.
WMT’s purchase of Flipkart is a good thing. Trade accordingly.
Now, turning to the markets this morning…
Market Rundown for Thurs., May 10
S&P 500 futures are up 4.50 to 2,700.
Oil’s up $0.42 at $71.56.
Gold rises $4.80 to $1,317.
Bitcoin goes for $9,327 this morning, according to CoinDesk.
We’ll talk again on Friday.
For the Rundown,