JD Logistics, the delivery unit of Chinese ecommerce group JD.com, will seek to raise up to $3.4bn in what would be one of Hong Kong’s largest initial public offerings this year.
The company’s decision to list followed a boom in online shopping during the coronavirus pandemic. But a tougher regulatory environment for Chinese technology groups and a recent fall in the shares of SF Holding, one of JD Logistics’ largest competitors, pushed the company’s proposed IPO price down by about a quarter, according to a person close to the deal.
JD Logistics will sell 609.2m shares at HK$39.36-HK$43.36 (US$5.07-$5.58) each. The final price will be set on Friday and the shares are expected to start trading on May 28, according to terms of the deal seen by the Financial Times.
The IPO would be the second largest in the city this year after Kuaishou, a Chinese viral video app, raised $5.4bn in February, and would be the third blockbuster listing by JD.com in Hong Kong in the past year. JD Health, which sells pharmaceutical and healthcare services online, completed a $3.5bn IPO in December and JD.com carried out its own secondary listing in the territory last June, which raised almost $4bn.
Hong Kong has benefited from a flood of high-profile listings by Chinese technology companies in recent months and has hosted more than $20bn of IPOs this year, according to data from Bloomberg.
JD.com created its logistics and delivery arm in 2007 and spun it out into a standalone unit a decade later. The company operates more than 900 warehouses in China and provides delivery and warehousing services to third parties.
But the group is among those under pressure as China increases scrutiny of its largest internet groups. Last month, officials told 13 of the country’s biggest tech companies, including fintech subsidiaries of JD.com, Tencent and ByteDance, to “rectify prominent problems” on their platforms. The push was seen as a sign that regulatory focus on the sector was spreading beyond Jack Ma’s Ant Group, after the fintech company’s $37bn IPO last November was scuppered.
Separately, shares in SF Holding, China’s largest listed delivery company, fell sharply last month after a quarterly loss rattled investors and prompted scrutiny of the high valuations placed on Chinese companies.
“Competition in China’s logistics space is fierce, especially after [Indonesian company] J&T Express entered the market, which has had an impact on other logistics companies’ performance and will hit JD,” said Li Chengdong of Haitun, an ecommerce think-tank.
JD Logistics was initially the delivery arm of JD.com’s ecommerce site but an increasing portion of its business comes from ferrying packages on behalf of third parties.
Cornerstone investors in the JD Logistics IPO, which include Japanese technology group SoftBank’s Vision Fund, Temasek Holdings, Singapore’s state-backed investment company, and investment firms Tiger Global and Blackstone have subscribed to about $1.5bn of the shares, according to the terms of the deal.
Bank of America, Goldman Sachs and Haitong International are the joint sponsors for the listing.
Additional reporting by Ryan McMorrow in Beijing