Getting Acquired

Premsanth

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Uncovering trade secrets behind investment, acquisition and merger.

2020. 04. 25.

Facebook’s 5.7 Billion dollar investment on Jio platform. who is wining JIO or Facebook?

On April 22nd, there was a media release from RIL. It reads, RIL, Jio Platform and Facebook announced the signing of binding agreements for an investment of ₹ 43,574 crore (i.e 5.7 billion dollars) by Facebook into Jio Platforms for a 9.99% equity stake in Jio Platforms on a fully diluted basis. This is the highest investment, Facebook has ever made to acquire a smaller stake at a company. This investment values Jio platforms at a $65.95 billion dollar pre-money value. Wow! That’s a lot of money. So there comes the next question, Why is Facebook so desperate to acquire a small stake at a company at such an expensive price? To answer this question, let’s go back to the last earnings call at Facebook, where Mark Zuckerberg highlighted some important points. Beyond WhatsApp Payments, we’re working on several other efforts to help facilitate more commerce, from Facebook Marketplace to Instagram Shopping This is such a big space and it’s important for empowering people. so we’re taking a number of different approaches From businesses setting up storefronts to people for buying and selling to each other directly, people engaging with businesses directly through messaging, and a number of things on payments. This sums-up Facebook’s ambition clear, they wanted to be the centre of commerce from discovery to payments to delivery. Now, how is this vision related to this investment in Jio platform limited? Answer is JIO Mart. JioMart is an e-commerce platform launched this January by RIL, under its subsidiary Jio platform limited. JioMart app and website will have groceries and many other household items for customers to buy and it will be delivered to the doorstep without any extra charges. It operates on online-to-offline (O2O) business model which means the customers can buy the products directly through the app from nearby sellers. It will connect the offline retailer to online customers which means it does not sell products directly to the customers. The company is targeted to connect 30M, offline retailers with over 200M customers in India Having said that, now both companies align together on the same mission. Facebook has always been a great facilitator for commerce but haven’t had much success on its commerce business. But this deal could bring a lot of success to facebook and finally moinetize WhatsApp at scale. Jio and WhatsApp together have over 750 million users in India This collaboration, could boost millions of small and medium sized businesses of the country by offering a single platform for shopping, connecting businesses with customers directly and also helping consumers pay for their orders online using the same platform. There are several e-commerce platforms available in the country from BigBasket to Grofers to Amazon and more. The launch of JioMart in collaboration with WhatsApp could pose a threat to these platforms given the popularity of both the platforms. Anyway, for now, we must wait to see what Facebook and Jio are up to with JioMart e-commerce platform.

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Getting Acquired