The logistics arm of the e-commerce giant JD.com is seeking to raise up to USD 3.4 Billion through Hong Kong listing. According to the company’s initial public offering (IPO) filing, it is planning to sell 10% of the total shares in the deal. JD Logistics stated it can issue 91.4 million shares more if there is robust demand in the market.
JD Logistics is anticipated to offer shares on Monday at a price range of between USD 5 and USD 5.5 per share to the retail investors. The company’s prominent eight investors have pledged to purchase a total of USD 1.5 Billion worth of shares. Its cornerstone investors include SoftBank, Temasek Holdings, China Structural Reform Fund, Tiger Global Management, and Blackstone. JD Logistics IPO will run over the week and is expected to make a public debut on May 28 in Hong Kong.
The China-based JD logistics can become the second company to launch a multi-billion IPO this year. Kuaishou Technology raised around USD 6.2 Billion in IPO in January 2021. Goldman Sachs, Haitong International, and BofA Securities are the top underwriters of the JD Logistics IPO, while UBS will be acting as a financial advisor. If the company’s share lists at the top end, the market capitalization would reach USD 34 Billion, surpassing Alibaba-backed ZTO express market valuation.
JD Logistics has not yet breakeven on its balance sheet. In 2018, it booked losses of about USD 435 Million, 341 Million in 2019, and around 621.4 Million in 2020. “As we currently prioritise growth of our business and expansion of our market share over profitability, there can be significant fluctuations in our profitability profile in the near-to-medium term,” the company said. JD Logistics is striving to distinguish itself in the logistics market by introducing self-driving vehicles, sorting robots, and autonomous robots to provide value-based services.
According to the research firm China Insights Consultancy, the logistics market in terms of spending is anticipated to expand at a CAGR of around 29% by end of 2025. However, it was appalling to see when China-based SF Express projected a loss of USD 168.4 Million in its first quarter of 2021. Its stock price halved since its mid-February high. Currently, STO Express, ZTO Express, Yunda Holding, and SF Express account for more than 75% of the total logistics market in China.
Alibaba’s competitor JD.com started building its logistics network in 2007 and spun out the company as a standalone unit in 2017. The parent company has around 79% stake in JD Logistics. The latter company reported that it holds more than 4,400 patents related to automation technologies. According to the JD Logistics prospectus, it has around 9,000 warehouses and 246,800 employees working in the delivery segment. “Our growth strategy is partially based on the assumption that the trend toward outsourcing of supply chain services will continue,” the company mentioned in its prospectus. The logistics company reported revenue growth of 47% in 2020.
The parent company and its healthcare arm made a public debut in 2020
The e-commerce giant carried out a secondary listing in Hong Kong last year. JD.com raised around 3.87 Billion from its IPO. The company has already listed itself on NASDAQ in 2014. Its secondary listing came up amidst the rising tension between China and the US. Last year, a bill was in the news that could force the US stock exchanges to delist China-based companies.
In the fourth quarter of 2020, JD.com reported 31% revenue growth since last year’s same fiscal period. During the quarter, the company listed its healthcare arm JD Health in Hong Kong. JD Health arm raised USD 3.5 Billion in its Hong Kong IPO. After the listing, its shares jumped 60% above the listing price.
“We believe there will be a significant push for the legislation to be taken up in the coming weeks, and we believe it is only a matter of time before this bill (or something similar) is signed into law,” Ed Mills, a Washington Analyst, wrote. On the other hand, Hong Kong Stock Exchange reformed some rules that attracted China-based technology companies.
Before the public listing, JD.com issued a statement that said the company will use the raised money to “invest in the key supply chain based technology initiatives to further enhance customer experience while improving operating efficiency.” It added that the “supply chain based technologies can be applied to the Company’s key business operations including retail, logistics, and customer engagement.