By Aman Shah
Jan 30 JD.com, China's second-largest e-commerce
company, filed for a U.S. listing of its shares, following
market leader Alibaba Group Holding Ltd in tapping
into rising investor enthusiasm surrounding China's booming
online retail market.
Appetite for Chinese technology stocks recovered in 2013
after a series of accounting scandals dried up U.S. listings in
2011 from a high of 40 in 2010.
JD.com, which filed a placeholder of up to $1.5 billion on
Thursday, has grown exponentially over the past years and said
in December it would top its 100 billion yuan ($16.5 billion)
annual sales target in 2013.
China's business-to-consumer e-commerce sales may surpass
$180 billion this year due to rising internet penetration,
expanding middle-class incomes and a steadily improving
distribution network, according to New York-based market
research firm eMarketer.
This potential has attracted global retailing giants such as
Wal-Mart and Amazon Inc to China, which is soon
expected to overtake the United States as the world's biggest
online retail market.
"Investors are very hungry for the piece of consumer
e-commerce space in China," Francis Gaskins, a partner at IPO
research company IPODesktop.com, told Reuters
JD.com and other web-based retailers, however, operate in
the sizeable shadow of Alibaba, which controls nearly 80 percent
of the country's internet shopping market. Alibaba is expected
to go public this year in what is billed as the biggest IPO
since Facebook Inc's 2012 float.
In an interview with Reuters in December, Shen Haoyu,
JD.com's chief operating officer, said the timing of the Alibaba
IPO was not a consideration for his company's IPO.
JD.com, earlier known as 360Buy, has raised $2.23 billion in
the past six years from investors including the Ontario
Teachers' Pension Plan and Saudi billionaire Prince Alwaleed bin
Talal's Kingdom Holding Co
The company's founder and CEO, Richard Liu, has a 46 percent
stake in JD.com. Other shareholders include hedge fund Tiger
Global Management and DST Global funds.
Josef Schuster, founder of IPOX Schuster, a Chicago-based
IPO research and investment house, said investors would "flock"
to the deal if it is priced at a valuation of $10-$13 billion.
In September 2011, IFR, a Thomson Reuters publication, said
JD.com was planning to raise $4-$5 billion through a U.S. IPO.
Local media reports in late 2012 valued the company at $7.3
billion after a $400 million round of funding.
"Big gains of other China-linked IPOs in the U.S. have left
a good taste in investors' mouths," Schuster said in a note to
JD.com has tried to differentiate itself by operating its
own network of couriers and warehouses, a factor it says ensures
timely and efficient delivery.
Alibaba still depends on merchants and external courier
firms for their logistics.
JD.com, which listed BofA Merrill Lynch and UBS Securities
LLC as underwriters to the offering, posted a profit for the
first nine months of 2013 after a string of losses, according to
the IPO filing. ()
It had 35.8 million active customer accounts and processed
211.7 million orders in the first nine months of 2013. Total net
revenue jumped 70 percent to $8 billion in the period.
Expectations have been building for months around
Hangzhou-based Alibaba, with bankers predicting an IPO that
could raise up to $15 billion and value the company at more than
$100 billion - sums that have drawn comparisons to the frenzied
Facebook offering in 2012.
JD.com, like a number of other Chinese companies listing in
the United States, relies on a little-tested legal structure
called "variable interest entity" (VIE) that gives an investor
economic interest but no ownership.
The structure helps companies bypass Chinese government bans
on foreign ownership in some business sectors.
Shares of Chinese car sales website Autohome Inc,
which also has a VIE structure, surged as much as 83 percent
when they listed in December.
JD.Com's filing with the U.S. Securities and Exchange
Commission did not reveal how many American Depositary Shares
the company planned to sell, their expected price or the
exchange on which it would list them.