The all-secondary offering follows the expiry of six-month post-IPO lock-up arrangements that expired on November 18. JD.com shares have risen as much as 74% since May’s IPO, but closed Friday ahead of the offering at US$24.08, a 27% gain from the company’s US$19 a share IPO price. The shares eased to as low as US$23.60 early Monday after the filing.
The offering, likely to launch and price as early as next week, was not entirely unexpected.
The filing does not disclose the number of shares to be sold or the identity sellers, but founder and chairman Richard Qiangdong Liu will control 83.5% of the company following the offering through his ownership of both Class A and supervoting Class B shares. Other major shareholders include China’s internet company Tencent Holdings, Julian Robertson’s Tiger Global Management, Hillhouse Capital Management and Yuri Milner’s DST Global.
Bank of America Merrill Lynch and UBS are slated to lead the offering. Both banks were conflicted out of the Alibaba offering because of their work on the JD.com IPO.
The follow-on offering follows the release last week of the company’s third quarter earnings, showing a 109% year-on-year increase in active customer to 46m and a 111% increase in gross merchandise volume to RMB67bn. The company expects fourth quarter net revenue of RMB32bn-RMB33bn, representing year-on-year growth of 59-64%, versus 61% growth in the third quarter.
“Looking ahead, expanding product selection across our platforms, reaching a broader range of customers in high-growth markets and enhancing mobile offerings remain our key priorities,” Liu told analysts on the company’s earnings conference call.
JD.com’s May IPO that acted as a appetiser for investors ahead of Alibaba’s US$25 IPO in September. Both companies are ecommerce companies that compete with each other, but Alibaba is more of a third-party platform and JD.com focuses more on direct sales with its own nationwide fulfillment infrastructure. Unlike Alibaba, JD.com is unprofitable, generating a US$740m net loss in the nine months ended September 30, 2014. At the end of the quarter, the company had nearly US$3.4bn in unrestricted cash and cash equivalents.
JD.com’s general and administrative expenses in the first quarter of 2014 were materially increased by US$591m of share-based compensation costs related to restricted share units vested to Mr Liu.
