Why Walmart Is Considering a SPAC IPO for Flipkart

Just over a week ago, electric vehicle maker Lucid Motors agreed to go public in a reverse merger with a special-purpose acquisition company (SPAC) in a deal that set a pro forma value on a company that has not yet built a single car at around $24 billion, the richest
SPAC deal ever.

Now, Walmart Inc. (NYSE: WMT) reportedly is considering a SPAC offering for its Flipkart subsidiary based in Bengaluru, India, that would value the e-commerce retailer at more than $35 billion.

Citing people familiar with the matter, Bloomberg News reported Thursday morning that Flipkart has been considering a U.S. initial public offering (IPO) and also has begun to explore different ways of listing shares publicly. Blank-check companies like Churchill Capital, the platform from the Lucid Motors deal, that put together deals for guaranteed cash proceeds have become very popular with both U.S. startups and investors.

The main advantage to Walmart, which acquired 77% of Flipkart in 2018 for $16 billion, is that a SPAC deal can happen more quickly than a standard IPO or even a direct listing.

Would that be the best deal for Walmart shareholders? SPAC IPOs are generally tilted to favor the fund’s managers and early investors. In order for Walmart shareholders to get the most out of a SPAC merger, the company may have to launch its own SPAC and then use the funds raised in the fund’s own IPO to launch a deal for Flipkart.

Walmart reported cash on hand at the end of January totaling $17.7 billion, compared with some $41 billion in long-term debt. The retail giant also has high-grade credit ratings of Aa2 from Moody’s and AA from Fitch Ratings and could easily and cheaply finance a SPAC with the goal of launching Flipkart’s U.S. listing.

The possibility that Walmart and Flipkart will choose the SPAC route to a U.S. IPO seems remote but is probably not zero. A conventional IPO, though it would take longer, is more likely to provide the most value for existing Walmart shareholders. And Walmart’s not in any particular rush either.

Early Thursday, Walmart shares traded up fractionally, at $128.56 in a 52-week range of $102.00 to $153.66. The consensus price target on the stock is $159.84.

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