Berkshire Hathaway, the investment firm led by Warren Buffett, has made the decision to sell its shares in One97 Communications, the parent company of Paytm. This move comes at a loss of approximately 40% on the investment made over five years ago.
Key Takeaway
Berkshire Hathaway has sold its shares in Paytm at a loss of 40%, making it one of the rare instances where Warren Buffett’s firm did not achieve a profitable outcome. This exit highlights the volatility and risk involved in startup investments.
Background
In 2018, Berkshire Hathaway invested around $260 million in Paytm, acquiring a 3% stake in the financial services startup. At that time, Paytm was valued at about $10 billion. This marked Berkshire Hathaway’s first direct startup investment in India.
The Investment Journey
Berkshire Hathaway initially sold a stake worth $36 million in Paytm in 2021, reaping a profit. However, the firm decided to sell its remaining position on Friday for $121.6 million. This transaction resulted in a return of $157 million on its original investment in Paytm.
Paytm’s Performance
Paytm made its IPO debut in 2021 at a price of $25.8 per share. However, the company experienced a significant drop in its share price, which reached as low as $5.58 a year ago. Fortunately, Paytm has since rebounded, with its share price closing at $10.73 on Friday. This recovery can be attributed to the company’s fast revenue growth and improving financial performance in recent quarters.
In conclusion, Berkshire Hathaway’s decision to exit its investment in Paytm reflects the challenges and uncertainties that come with investing in startups. While Paytm’s recent recovery may indicate positive prospects for the company, Berkshire Hathaway was unable to fully capitalize on its investment.
