JD.com prices HK shares as US-listed Chinese firms look homeward

E-commerce giant raises $3.9 billion in its Hong Kong IPO, the world's second-biggest this year

by Umesh Desai
JD.com prices HK shares as US-listed Chinese firms look homeward
People walk past a JD.com delivery cart in Beijing on June 12, 2020. The Chinese e-commerce giant said on June 12 it raised US$3.9 billion in its Hong Kong initial public offering. Photo: Greg Baker / AFP

(ATF) E-commerce giant JD.com raised HK$30 billion ($3.9 billion) in its Hong Kong initial public offering – the world's second-biggest so far this year – heralding a rush among US-listed Chinese for secondary listings in the city.

The bumper sale comes as Chinese companies eschew Wall Street because of rising tensions between Washington and Beijing.

Currently, there are 249 China ADRs – American Depositary Receipts – listed in the US with a combined market cap of US$1.5 trillion, according to Jefferies' analysts.

“The company plans to use the net proceeds from the Global Offering to invest in key supply-chain based technology initiatives to further enhance customer experience while improving operating efficiency,” it said in a statement.

“The supply-chain based technologies can be applied to the company’s key business operations including retail, logistics, and customer engagement.”

Netease listing

Fellow Chinese tech giant NetEase raised $2.7 billion in the city earlier this month, capping a frenetic few weeks on the stock exchange despite swirling fears over Beijing's plan to impose a national security law on the finance hub.

Analysts said Hong Kong was likely be the destination for broader migration of Chinese firms (ADRs) listed in the US.

“Academically, an estimated US$600 billion of new market cap will be added in 1-3 years, representing just under 15% of the current HK market cap,” Jefferies' analysts Alexious Lee, Cara Liu, Fion Xuan and Yiming Wang said in a report, while adding the broader implications were an ADR/HK premium and the potential dilution effect.

JD.com, which listed on the Nasdaq exchange in New York in 2014, priced its 133 million new shares at HK$226 each, the company said in a statement on Friday.

Trading in Hong Kong is expected to kick off next Thursday, on June 18.

It can also sell an additional 19.95 million new shares at the offer price as an over-allotment option, exercisable from June 11 until 30 days after.

The JD.com IPO is the second-largest global offering this year after Beijing-Shanghai High Speed Railway raised $4.3 billion in January, according to Bloomberg news.

The dual listing will help the company better compete with e-commerce rivals such as Amazon and Chinese titan Alibaba, which raised a whopping $12.9 billion in a secondary Hong Kong IPO last year.

While Hong Kong remains an attractive destination for listing, the city is in the midst of a recession and swirling political unrest, with pro-democracy protests raging on and off for the past year.

Beijing has dismissed public anger as a foreign plot and announced plans to impose an anti-subversion law on the city, which has some businesses worried that it may lose the autonomy from the mainland that has propelled its economic rise.

But Beijing and Hong Kong authorities say the law will stabilise the city and reinforce confidence.