SoftBank Puts the Flip in Flipkart With Walmart Deal
(Bloomberg Gadfly) -- So much for long term.
The ink is barely dry on SoftBank Vision Fund's purchase of a stake in Flipkart Online Services Pvt and already it's preparing to exit. Masayoshi Son seemed so keen on the Indian e-commerce startup that he threw $2.5 billion at it in August.
Now he's set to sell a substantial part of the fund's 20-percent-plus stake to Walmart Inc., allowing the U.S. retail giant to take a majority interest, Bloomberg's Saritha Rai reported Monday. Should the deal go through, Flipkart would be valued at around $20 billion, up from $12 billion last year. According to Recode, Flipkart is the Vision Fund's fifth-largest investment behind Uber Technologies Inc.
That means SoftBank Vision Fund is set to turn $2.5 billion into about $4 billion in less than eight months. Not bad. But it's not the huge multiple, nor the long-term investment, that we'd been led to believe Masa was interested in.
SoftBank Group Corp. needs money -- its balance sheet is debt heavy and a planned IPO this year of its Japanese telecom company will only go some way to lightening the load. Yet this sale is from the fund, not the group, so the cash shouldn't flow to the listed entity. Instead, it'll go back into a pile of cash funded by the governments of Saudi Arabia and the United Arab Emirates.
Flipkart will get the benefit of a new patron, one with skin in the retail game, and Walmart will finally get access to a substantial overseas market. The fund, however, gets more of the one thing it's already got in abundance.
With such a deal, SoftBank would be putting the flip in Flipkart, but showing that its Vision Fund lacks vision.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Tim Culpan is a technology columnist for Bloomberg Gadfly. He previously covered technology for Bloomberg News.
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