Amazon is demanding that some suppliers grant the online retail giant the right to buy shares of their stock at, potentially, bargain prices. What the suppliers get in return are contracts with the eCommerce king.
The Wall Street Journal reports that the online retailer has reached these kinds of deals with at least a dozen publicly traded companies. What Amazon gets is the rights, known as warrants, to buy the suppliers’ stock at some future time.
The lure for Amazon is the potential to strike a deal now to buy later at below-market prices. For suppliers, it may seem that the online behemoth is making them an offer they can’t refuse.
The WSJ reported from both corporate filings and interviews with people involved with the deals.
In addition to publicly traded companies, Amazon has made, over the past decade, 75 such agreements with private companies. The WSJ said Amazon’s potential stakes in these other companies could be worth billions of dollars.
The types of businesses these include range from call-center services to natural gas holdings. In some of these deals, Amazon could become the top shareholder. With some pacts, the online retailer gets board representation and the right to make a counteroffer if a company is up for sale.
What suppliers get are big, potentially lucrative contracts — which can, in turn, boost their share prices.
Former Amazon executives told WSJ that with the supplier deals that include warrants, the retailer is throwing its weight around — knowing many companies won’t refuse.
For its part, the retailer is on a roll. It has just released the Dash Shelf, which aims to automate the shopping process for customers around certain goods.
And last week (June 21), Amazon ordered up 1,000 autonomous driving systems from from Plus, a self-driving tech startup. At the same time, the eCommerce giant also got the rights to buy as much as a 20 percent stake, a detail that Plus revealed in a regulatory filing.
Plus plans a merger with Hennessy Capital Investment Corp., a special purpose acquisition company (SPAC).
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