JD.com Inc., the Chinese online retailer whose business model is similar to Amazon.com Inc.’s, raised $1.78 billion in its U.S. initial public offering after pricing the shares above the marketed range.
JD.com sold 93.7 million American depositary receipts for $19 each, according to a statement. Concurrent with the offering, Beijing-based JD.com is selling shares to Tencent Holdings Ltd., Asia’s largest Internet company, valued at $1.3 billion. The shares are expected to start trading today on the Nasdaq Stock Market under the ticker JD.
The offering is the largest ever of a Chinese Internet company listing in New York, according to data compiled by Bloomberg. Investors are seeking to capitalize on growth in China, where revenue from e-commerce will increase 64 percent this year, compared with 12 percent in the U.S., according to projections by digital researcher EMarketer Inc.
“This was clearly driven by demand for Chinese names,” said James Gellert, chief executive officer of Rapid Ratings International Inc., a New York-based firm that uses quantitative models to grade securities. “JD will have to put their cash to work and be more efficient and make that drive for profitability faster.”
At the offering price, JD.com’s market value is $26 billion, or 2.3 times last year’s sales of $11.5 billion, according to data compiled by Bloomberg. That compares with Amazon’s 1.9 and is cheaper than EBay Inc.’s multiple of about 4, according to data compiled by Bloomberg. JD.com hasn’t posted an annual profit.
Larger Chinese e-commerce company Alibaba Group Holding Ltd. filed to go public in the U.S., for an IPO expected in 2014.
“JD.com’s IPO is definitely a positive for Alibaba. Alibaba is basically the last large-scale company that is waiting to list in this round of IPO wave,” Li Yujie, an analyst at RHB Research Institute Sdn. in Hong Kong, said by phone today. “Alibaba has a much larger market share than JD.com, if it manages to maintain a growth rate of 50 percent then its valuation could be lifted again.”
Li says Alibaba, which reported profit more than doubled to $1.35 billion in the three months ended December, could be valued at $200 billion in the upcoming IPO.
JD.com and Alibaba offer different business models: JD.com uses an online-direct sales system handling much of its own e-commerce logistics, and Alibaba provides the platform that brings buyers and sellers together.
JD.com received an early boost from Tencent, which acquired a 15 percent stake in March, and added to that stake in the private placement. The partnership may tap the 400 million monthly active users on Tencent’s WeChat messaging service to boost traffic to JD.com’s online store.
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