Walmart’s $16 Billion Equity Raise Causes Wall Street Unrest

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By Published On: June 25, 20180 Comments

To fund its investment in India’s leading e-commerce player, Flipkart, Walmart has reportedly sold off $16 billion in bonds; in what has quickly become the United State’s second major corporate debt restructure of the year.

The American department store giant reportedly offered fixed and floating-rate notes in nine parts, with the longest bond sold with a 30-year security and a yield of 1.05 percentage points above Treasuries, Bloomberg reports.

According to insiders who are close to the deal, but wish to remain anonymous, the bonds were originally on offer for 1.2 percentage points, but negotiations dropped to the closing figure of 1.05. The approved deal reportedly edged out an offer that was made by Bayer AG, a pharmaceutical and life sciences company, two days prior.

Last month, Walmart confirmed it had successfully acquired a 77 percent stake in Flipkart, beating out the likes of Amazon to take a controlling stake in one of the world’s fastest growing e-commerce markets. According to Walmart, the deal will help it expand its digital footprint, as it embraces the modern era of marketplace shopping.

“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 the transformation of e-commerce in the market,” said Dough McMillon, Walmart’s president and chief executive.

This deal came less than a week after Walmart reached agreements to sell a controlling stake of its British business, Asda, for the sum of $10 million to one of the company’s competitors, which insiders believe is a sign of McMillon’s desire to focus on growing markets such as China and India.

Wall Street Fallout From Flipkart/Walmart Deal

While the Flipkart/Walmart deal has been a big win for the retailer, Wall Street has had mixed reactions to its $16 billion investment. A number of equity analysts have reportedly cut their prices for Walmart’s stock, while others have put the stock under review.

According to S&P Global Ratings, there’s a 33 percent chance it will downgrade Walmart’s AA rating over the next couple of years in response to the retailer’s “aggressive deal-making”.

Walmart has been taking substantial steps over the past few months to compete with global e-commerce giants like Amazon, launching a redesigned website in April. This came after the business reported a drop in online sales growth, with its February figures causing unease for analysts and shareholders.

At the time, Walmart reported quarterly profits below industry expectations, as well as a sharp dip in its online sales growth, causing its stock to drop by 7.02 percent in pre-market trading.

Walmart’s recent acquisition of Flipkart and its website revamp is expected to help boost its online revenue in the long-term.

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Heather Bone