India’s largest ecommerce firm Flipkart has initiated share buyback from its minority investors ahead of its expected deal with Walmart. According to reports, the deal with Walmart is currently in the final stages of negotiation and Flipkart has decided to take the company private by reducing the number of shareholders.
Flipkart is currently registered in Singapore where the compliance regulations for public limited companies are tougher than private limited companies. Moreover, any company with more than 50 shareholders is considered a public limited company in Singapore. Flipkart currently has about 145 shareholders, and the company wants to bring this down under 50 in order to minimize the compliance burden associated with this deal.
It is also reported that Flipkart has set aside about $400 million to initiate the share buyback process. This share buyback program will only focus on consolidating the interests of minority shareholders of the company. Some of the company’s majority shareholders such as Tiger Global, Softback, and Naspers are not expected to sell their shares in this process.
As of now, Softbank is the largest shareholder in Flipkart with about 21% stake in the company. When Softbank invested $2.6 billion in August 2017, Flipkart bought back shares from certain minority investors and consolidated the stake in the company.
Tiger Global is the second largest investor in the company with about 20.5% stake. Naspers has around 13% stake in Flipkart. The company’s founders Sachin Bansal and Binny Bansal each hold about 5% stake in the company.
Multinational retailer Walmart is reportedly in the process of acquiring a majority stake in Flipkart. Sources say that Walmart is likely to offer $12 billion for 60% stake in the company. Global ecommerce giant Amazon has already made a formal offer to buy controlling interests in Flipkart. Most of Flipkart’s shareholders, however, are in favour of a deal with Walmarket since it is less likely to run into regulatory hurdles.