Walmart is dropping after announcing it’s taking a majority stake in Indian e-commerce giant Flipkart

source
Markets Insider

  • Walmart shares are sliding Tuesday after the company announced it’s purchasing a majority stake in Indian e-commerce giant Flipkart.
  • Walmart will pay $16 billion for a 77% stake.
  • An analyst warned in a recent note this could be a costly acquisition for Walmart.
  • Watch Walmart trade in real time here.

Walmart shares are dropping more than 4% in early trading Wednesday after the retailer said it will pay $16 billion for a 77% stake in Indian e-commerce giant Flipkart. The deal values Flipkart at $20 billion.

Flipkart, which has often been compared to Amazon, is the leader in Indian e-commerce and and sells apparel, traditional retail items, and consumer electronics. Walmart expects the company to grow at a rate of four times the overall retail market in India, according to a press release announcing 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 eCommerce in the market,” Walmart President and CEO Doug McMillon said in the press release.

“We are confident this group will provide Flipkart with enhanced strategic and competitive advantage.”

But not everyone is so convinced this acquisition is the right one for Walmart. Oppenheimer analyst Rupesh Parikh said in a recent note to clients that the acquisition could be a losing one for Walmart – at least in the near-term.

“We view a potential acquisition of Flipkart as potentially negative in the shorter term as it likely leads to earnings dilution,” he wrote.

Walmart is down 16.63% on the year.