Amazon reportedly pressuring suppliers for a discounted stake in their businesses
It has struck deals to potentially buy stock in dozens of vendors at below-market rates.
Amazon has reportedly struck dozens of deals with suppliers to buy stakes in their companies, potentially at lower rates. It has scooped up warrants for at least a dozen publicly traded companies and more than 75 private businesses, according to The Wall Street Journal. Amazon's stakes and potential stakes in those organizations is worth billions of dollars.
Warrants work in a similar way to stock options. Holders of warrants can buy shares at a fixed price during a certain period. If the share price rises during that time, the warrant holder can swoop in and buy a stake in the company at a below-market rate.
Amazon is said to have warrant deals with Kohl's, aircraft-leasing companies, call center businesses and hydrogen fuel cell suppliers, among others. Some of the deals have made Amazon one of the top shareholders in the respective companies, according to the report. In several cases, the ecommerce giant has the right to board seats and an option to outbid any acquisition offers.
Leaders at some of the companies suggested they couldn't turn down Amazon's proposals, else they could risk losing a big contract to a competitor. Some chalked up Amazon's demands as the price of doing business.
Amazon told the WSJ that warrant agreements are part of less than one percent of the deals it agrees with suppliers. In some cases, the warrants are connected to certain thresholds. They often don't come into effect until Amazon purchases a certain level of goods or services.
We've seen some other evidence of this strategy in action. Last week, Amazon ordered 1,000 autonomous driving systems from Plus, a company that develops such tech for self-driving trucks. It also has the option to buy up to a 20 percent stake in the startup.
Amazon has reportedly been engaging in this practice over the last decade or so, and it's said to have ramped up its efforts to secure warrants over the past few years. However, with Amazon facing deepening antitrust scrutiny, regulators may not look favorably on a report that suggests Amazon is pressuring companies into accepting terms that could require them to sell stakes at below-market rates.
