Oh That's Interesting!

Facebook - Jio deal : A summary - Abhishek Murarka

Facebook acquired 9.99% stake in Reliance’s Jio platform for Rs 43,574 crores, (US$ 5.7) billion valuing it at Rs 4.36 lakh crore. That's 56% of market cap of RIL (7.8 lakh cr) – That's huge!!!

This is the largest investment for a minority stake by a technology company ANYWHERE in the world.

Deal rationale - Facebook had $50 billion of cash on its balance sheet, making practically no money. Deploying $5.7 billion in Jio gives them broader access to India and Jio's 39 crores (390 million) users.

Commercial partnership between Reliance Retail and WhatsApp to accelerate Reliance Retail’s New Commerce business on the JioMart platform using WhatsApp.

For Reliance, the deal makes sense as it reduces the loans on its balance sheet, while at the same time getting a strong technological partner.

Jio is expected to become the # 1 telecom network in India by end of Q4FY20, taking share from Vodafone-Idea.

The focus here really is on #JioMart. It is likley that users will be able to order groceries directly from WhatsApp, instead of using a separate app.

Facebook struggled with regulators in India for 3 years trying to get an entry while trying to launch WhatsApp Pay in face of opposition from PayTM etc. So FaceBook made a deal with the big daddy of Indian company Reliance to get market access.

Facebook had recently released the crypto currency #Libra 2.0 whitepaper. Libra was blocked in principle right upon its release by Indian regulators. Whatsapp pay and the partnership could lay a new foundation for pushing Libra. Jio has already been experimenting with blockchain & a Jio coin
Jio coin may be coming out in the future.

Data is the new oil.

Here's something interesting : Reliance Jio was launched in 2016: Facebook invests at the valuation of 4.35 lakh crore. Reliance Industries was incorporated in 1973: Total market capitalization is 7.8 lakh crores.

So 5 years of telecom is greater than 43 years of standalone Reliance Industries
It is common knowledge that Berkshire's 50 Billion dollar loss is due to markdown in valuation of it's portfolio. The point of the post, is just to highlight the fallacy of the oft repeated idea/quote Rule no 1 of investing : Never lose money, and rule no 2, Do not forget rule no 1.....

Unless one is God or superhuman, no trader/investor can avoid making a loss. No matter, how sure, how careful, how much of a genius one is, no stock market investment is guaranteed to always make money. Losing some money while investing is a part of the process of making money.

Secondly, if one follows the quote in investing and trading, one will limit himself and may miss opportunites out of fear being extra cautious. Losses need to be taken in the stride if one wants to have an above average return.

Now assuming that the markets tank, and the world economy goes into a recession, no matter what Warren Buffet believe, he will have to take losses in his stride till there is economic recovery. That is the cost of doing business.

Having said all this, and even keeping aside the fact that Berkshire Hathway's portfolio has had a negative return of over 20% about 5 times
atleast, even the genius of Warren Buffet could not help avoiding millions of dollars in losses on his investment that have nothing to do with MTM, but due to mistakes made that became clear only later. Among such losses, major ones include loss of 3 billion dollars in Heinz, over 400 million dollars in Tesco, about 900 million dollars in an energy company and about 3.50 billion dollars in Dexter Shoes.

Having said, all the above, I admire and respect Warren Buffet as a person who has made long term buy and hold investing popular. But that quote of not making a loss is something that a trader/investor needs to overcome, without which he will not be able to pull the trigger.

it's mark-2-market. Berkshire is like Mutual Fund, if values of stock portfolio goes down, they have to report it as losses. even though it's paper loss (or profit).
An interesting observation, I am generally sure that stocks are the best solution for the long term, because it allows you to work in a slightly more passive format (if you have done a competent analysis before that of course)!
It will take you to attend courses of 3-4 fake gurus, before you meet one who will teach something of value, again which you need to change / modify / adapt according to your mindset and trading style before you can make money off it.


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