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Is Jio’s Overseas IPO Plan Good for Facebook Stock?


Sep. 4 2020, Updated 6:54 a.m. ET

India’s Jio Platforms is considering an initial public offering of its shares on a foreign exchange, according to a Bloomberg report. Notably, Facebook (NASDAQ:FB) invested $5.7 billion to purchase a 10% stake in Jio last month. At $232 per share currently, Facebook stock has risen 36% since the Jio investment on April 21. The stock has pulled up 70% from its pandemic lows in the first quarter.

Jio is a subsidiary of Reliance Industries—an Indian conglomerate with interests in the telecom, energy, and retail industries. Jio focuses on wireless and digital services like e-commerce. Launched in 2016, Jio has grown rapidly to become India’s largest wireless provider with about 400 million subscribers in just three years.

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Facebook stock and Jio’s IPO

Jio’s overseas IPO could come in the next 12–24 months. According to the Bloomberg report, the overseas listing would give Jio a higher valuation, which should bode well for existing investors like Facebook. Notably, Facebook’s investment valued Jio at $66 billion.

A higher valuation for Jio looks good for Facebook stock. First, Facebook could make a big profit when it decides to sell its Jio stake. Second, a higher Jio valuation would boost Facebook’s asset valuation. Also, a higher valuation could help Facebook obtain future fundraising for investment in capacity expansion or its stock repurchase program. The company’s stock repurchase program got $10 billion in the first quarter.

Softbank was one of the early investors in Alibaba (NYSE:BABA). Right now, the company’s 25% stake in Alibaba is worth $135 billion given Alibaba’s $540 billion market capitalization. Meanwhile, Softbank used a portion of its Alibaba stake to raise $11.5 billion towards its goal of raising $41 billion for debt repayment and stock repurchase.

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Digital payment and e-commerce partnership

In addition to the investment for a stake, Facebook also struck a partnership with Jio. The companies agreed to collaborate in digital payment and e-commerce solutions. Currently, Jio is testing an online shopping service on Facebook’s WhatsApp platform.

Facebook has been working on a digital payment platform, Libra, which could launch in November. India has one of the fastest-growing e-commerce and digital payments markets. As a result, India might important for Facebook’s Libra project.

In addition to the excitement about the Jio investment, Facebook stock has also risen due to its strong first-quarter earnings. Investors have flocked to Facebook stock as economies reopen following coronavirus shutdowns. The lockdowns diminished the spending on advertising—Facebook’s main revenue source.


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