In its latest 10-Q, Walmart (WMT) reported taking part in another investment round in Flipkart, the Indian ecommerce marketplace of which it owns the majority. Flipkart raised $3.6 billion in equity funding:

“...a portion of which was contributed by the Company, which reduced the Company's ownership of Flipkart to approximately 75%.”

It’s not clear how much the offering diluted Walmart. The company paid $16 billion for its stake in Flipkart in 2018. Walmart’s most recent 10-K— which was filed approximately three months before Flipkart’s latest funding round— noted Walmart’s stake was 2%-6% higher than it is following the latest round:

“...the Company acquired 81 percent of the outstanding shares, or 77 percent of the diluted shares…”

Understanding whether Walmart’s now 75% stake is in reference to outstanding or diluted shares matters because either reports estimating Flipkart’s value at $37.6 billion are incorrect or Walmart’s ownership stake is now much less than disclosed in the latest quarterly filing. It’s also the second time Walmart has provided Flipkart with additional cash following its initial investment.
With competition in India from Amazon and local player Reliance Industries, Walmart’s stake in Flipkart may be diluted further if more funding is necessary. Investors deserve to know just how much of the company Walmart really owns.

We’ve asked Walmart for clarification. Thus far, the company has refused to tell us whether its 75% stake in Flipkart is based on outstanding or diluted shares. We suspect it’s because the math doesn’t work. Either Walmart doesn’t own nearly as much as it says or Flipkart isn’t worth what Walmart and its new investors, which include Softbank, want investors to believe.

Walmart also disclosed potential regulatory trouble for Flipkart. In July 2021, the Directorate of Enforcement in India issued a show cause notice to Flipkart and certain current and former shareholders and directors of Flipkart regarding possible violations of India’s rules governing direct foreign investment:

“If a hearing is initiated and if it is determined that violations of the Rules occurred, the regulatory authority has the authority to impose monetary and/or non-monetary relief.”

Though the alleged violations occurred between 2009-2015— before Walmart purchased its majority stake— Walmart may be on the hook should Flipkart be penalized. Specifically, Walmart says there is no guarantee:

“... the amount of the proceeds the Company may receive in indemnification from individuals and entities that sold shares to the Company under the 2018 agreement pursuant to which the Company acquired its majority stake in Flipkart…”