Walmart Tanks After it Announces Deal with Flipkart

Shares of retail giant Walmart were in the red on Wednesday after the company announced that it would acquire about a 77% stake in Indian e-commerce company Flipkart.

The remaining stake will be held by existing investors of the company, including its co-founder Binny Bansal as well as Tencent, Tiger Global, and Microsoft.

This is Walmart’s largest deal in its history and the company has said it could lower earnings per share for the fiscal year by 25 to 30 cents. Next fiscal year earnings could be reduced by 60 cents. It’s no surprise the stock fell on Wednesday after Wall Street absorbed this information.

The deal could still be huge for the company’s future as Walmart heads of against retail giant Amazon.

According to reports Amazon had also bid for Flipkart.

The deal is expected to close at the end of the second quarter.

According to analyst Charlie O’Shea of Moody, “As Flipkart is expected to generate meaningful losses for at least the next few years, this is clearly an investment for the future, and when viewed in tandem with the recently announced sale of a majority stake in Asda, is indicative of Walmart’s long-standing strategy of shifting resources into higher growth potential markets and segments when opportune.”

Disclaimer: We have no position in Walmart Inc. (NYSE: WMT) and have not been compensated for this article.