JD.com's logistics unit gets go-ahead for up to US$4 billion IPO in Hong Kong

The logistics unit of Chinese e-commerce giant JD.com received the green light on Thursday to proceed with an initial public offering (IPO) that could raise between US$3 billion and US$4 billion on the Hong Kong stock exchange, according to people familiar with the matter.

The IPO would mark the latest JD arm to tap the Hong Kong markets in the past year. JD Health raised US$3.5 billion in an IPO in December and its Beijing-based parent JD.com raised US$4.5 billion in a secondary listing in Hong Kong in June 2020, the biggest fundraising in the city last year.

The JD Logistics spin-off is one of several highly anticipated offerings by China's technology companies this year. A representative for JD.com did not immediately respond to a request for comment on Friday.

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The potential listing, however, comes at a time when some investors have been questioning the sky-high valuations of technology companies. Video-streaming and mobile gaming site Bilibili raised US$2.6 billion in a secondary listing in Hong Kong in March, slightly below the US$2.8 billion it had targeted. Baidu, the Chinese search engine and artificial intelligence giant, flopped on its first day of trading after raising US$3.1 billion in a secondary listing in the city last month.

It also comes as Chinese regulators are clamping down on the country's big technology firms and their ubiquitous role in the lives of mainlanders, extending from shopping to payments to financial services. Alibaba Group Holding, the world's largest e-commerce company and a JD.com rival, was fined 18.2 billion yuan (US$2.8 billion) this month following a months-long antimonopoly investigation. Alibaba is the owner of the Post.

The potential listing comes at a time when some investors have been questioning the sky-high valuations of technology firms. Photo: Simon Song alt=The potential listing comes at a time when some investors have been questioning the sky-high valuations of technology firms. Photo: Simon Song>

Ant Group, the operator of mobile payments platform Alipay and an Alibaba affiliate, agreed to become a regulated financial holding company after regulators mapped out a blueprint overhauling the planet's biggest financial technology company.

On Thursday, China's top financial regulators summoned 13 technology leaders that run online financial businesses, including Tencent Holdings, JD.com and Tik Tok-owner ByteDance, to a meeting and told them to undertake efforts to end anticompetitive behaviour and halt "the disorderly expansion of capital".

Earlier this month, JD Technology, the fintech unit of JD.com, withdrew its application for an IPO on China's Nasdaq-style Star Market amid the sweeping regulatory changes. The company was previously known as JD Digits and JD Finance.

Some retail brokers in Hong Kong said they have received a lukewarm response so far, as they try to judge customers' appetite for a JD Logistics IPO.

"As the third JD.com company to list, JD Logistics will easily get attention due to the well-known brand name," said Kenny Ng Lai-yin, a strategist at Everbright Sun Hung Kai. "However, the IPO may come at a time when the stock market is volatile and recent big IPOs did not have a substantial increase [on their first day of trading]."

The logistics sector has been in focus in the past year as consumers, inside and outside China, have shifted more of their purchases to e-commerce sites against the backdrop of the coronavirus pandemic.

E-commerce sales are expected to account for more than half of retail sales in China this year, the first time a majority of retail sales in any country were bought online, according to research firm eMarketer. The company forecast in February that e-commerce sales would top US$2.8 trillion in China in 2021.

JD Logistics was created in April 2017 as a separate business unit under JD.com, using the company's widespread fulfilment network to provide integrated supply chain and logistics services to third-party companies, including warehousing, transport, delivery and after sales services. It also provides logistics technology such as cloud-based services and data analytics to third-party clients.

Ahead of the listing, JD.com owned 79.12 per cent of the logistics business and would continue to indirectly hold more than 50 per cent of its shares following the IPO, according to a February 16 statement. JD Logistics raised US$2.5 billion in February 2018, issuing a 19 per cent stake to third-party investors at the time, and raised an additional US$64 million in August 2020, issuing additional shares.

Some retail brokers in Hong Kong said they have received a lukewarm response so far for a JD Logistics IPO. Photo: Reuters alt=Some retail brokers in Hong Kong said they have received a lukewarm response so far for a JD Logistics IPO. Photo: Reuters>

Logistics and other services have steadily accounted for a larger portion of JD.com's revenue, rising from 1.3 per cent of its revenue in 2017 to 5.4 per cent last year, according to its most recent annual report. JD.com's revenue from logistics and other services reached 40.5 billion yuan last year.

JD Logistics operated more than 900 warehouses in China, with an aggregate gross floor area of about 21 million square metres (226 million square feet) as of December 31. In August, the logistics business said it would roll out 100 unstaffed vehicles in Changshu city in Jiangsu province and have up to 100,000 "autonomous robots", which look like minivans, on the nation's streets within five years.

BofA Securities, Goldman Sachs and Haitong International are acting as joint sponsors on the transaction, while UBS is serving as a financial adviser.

Additional reporting by Enoch Yiu

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2021 South China Morning Post Publishers Ltd. All rights reserved.

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