Warren Buffett’s Berkshire Hathaway unexpectedly invested in fintech startups for the first time, The Wall Street Journal reports.
Warren Buffett is known as an implacable bitcoin critic as well as the founder of several principles. For example, the conglomerate used to buy mostly blue chips of American companies. Buffett himself preferred not to invest in technology companies, a rule he rarely broke. One such exception was, for example, Apple. But the famous billionaire considers it to be not a technological but a consumer company. Buffett also invested in IBM, but in 2018 he sold all of its shares and admitted that he was wrong.
Buffett also used to consider it inappropriate to buy stakes at the IPO stage. The investor told shareholders at a general meeting in 2012 that he didn’t remember a single case in the past 30 years when a conglomerate would buy at least one new issue of shares, since there are thousands and thousands of businesses in the world, and this opportunity is not the most attractive.
However, WSJ reports that over the past few months, about $600 million have been received from Berkshire Hathaway by two emerging-market companies specializing in emerging markets – a Brazilian payment service StoneCo Ltd. and a fintech Startup Paytm from India. Launched in 2014, Stone became the fourth largest payment operator in Brazil in four years, and Paytm in terms of the number of users in the Indian market alone — more than 300 million — exceeds PayPal with its global reach.
So why did Berkshire Hathaway decide to invest in fintech startups? Buffet deals with Paytm and StoneCo indirectly, WSJ says. Todd Combs, the vice president of Berkshire Hathaway, is in charge of the projects. Along with another vice-president of the holding, Ted Weschler, he is considered to be the future successor of Buffett. This year, the billionaire even began to transfer a part of Berkshire Hathaway management authority to them. The main control over the company, however, remains in the hands of Buffett.
Combs and his colleagues have at their disposal almost $111 billion that have accumulated in the holding’s accounts. Buffett himself recently noted that the company needed to look for new areas where they could direct these funds. It is likely that the vice-president and his colleagues just are headed for new directions, including the fintech sphere. It is also worth remembering that the Berkshire portfolio already includes such processing companies as Visa and MasterCard. So the company has some experience of interaction with the industry. If we take into account the large-scale growth of Internet commerce and the ubiquitous transition to digital calculations, then the movement of Berkshire Hathaway in this direction is completely understandable.
Moreover, Stone and Paytm payment systems dominate their market. Launched in 2014, Stone in four years became the fourth largest payment operator in Brazil. Paytm surpasses PayPal with their client base in the Indian market alone. In 2016, Prime Minister Narendra Modi withdrew bills of 500 and 1000 rupees from circulation, which accounted for 86% of all Indian cash. The reform enabled services like Paytm to quickly gain popularity.
I wonder if we will now see a blockchain company in Berkshire Hathaway portfolio. So far Buffett remains an ardent opponent of cryptocurrency. Earlier, the head of Berkshire Hathaway made a lot of noise, saying that bitcoin is "rat poison squared." Buffett also believes that buying bitcoin is not an investment, but rather a speculation. The investor expressed confidence that the cryptocurrency industry will soon collapse. But as we see, everything changes. So who knows, maybe the inclination towards fintech startups will be followed by diving into the world of crypto?
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