JD.com Inc., the Chinese retailing website that filed for a $1.5 billion U.S. initial share sale in January, may kick off its offering in the second quarter, three people with knowledge of the matter said.
In a vote of confidence ahead of its planned public offering, Tencent Holdings Ltd., Asia’s largest Internet company, is taking a 15 percent stake in JD.com and will transfer its e-commerce business onto that site, according to a statement on March 9. In the deal, Tencent assigned JD.com a valuation of more than $20 billion by the time it goes public, said two of the people, who asked not to be identified because the information is private.
The new investment will allow JD.com, with its established market of 36 million active customer accounts, to tap the 272 million active users on Tencent’s WeChat message service to boost traffic to its online store. JD.com, which named Tencent’s Yixun.com, Amazon.com Inc.’s China unit and Alibaba Group Holding Ltd. as competitors in its IPO prospectus, will be better positioned against rivals with Tencent’s backing, said Eric Jackson, president of Ironfire Capital LLC.
“There was little excitement around the JD.com filing when it first came out, but investors will look at this a lot differently now that they’ve got big brother Tencent behind them,” he said.
JD.com’s January filing indicated a placeholder amount used to calculate fees that may change. The company wants to avoid listing at the same time as Alibaba, people familiar with the situation have said. Alibaba, China’s largest e-commerce company, also plans to go public this year, people have said.
Alibaba, which has weighed a share sale in both the U.S. and Hong Kong, is moving toward a U.S. listing after talks with Hong Kong’s exchange on a proposed corporate governance structure fell apart, people with knowledge of the matter said last year.
Representatives for Tencent, based in Shenzhen, China, and Beijing-based JD.com declined to comment. Alibaba has no timeline for the IPO, and it hasn’t chosen banks or a venue yet, spokeswoman Florence Shih said on March 7.
Chinese companies raised more than $900 million from first-time share sales in the U.S. last year, more than five times the amount in 2012, data compiled by Bloomberg show. JD.com’s offering would be the biggest ever for a Chinese Internet company in the U.S., the data show.
Many Chinese companies are attracted to the higher valuations they can get for their stocks in the U.S. lately, according to Josef Schuster, founder of IPOX Schuster LLC. His IPOX China Composite Index, which tracks the trading performance of Chinese companies that were recently listed in the U.S. and Asia, has jumped 15 percent over the past year. That compares with a 4 percent decline for the Hang Seng Index.
“The performance of recent IPOs has been driving the demand for Chinese deals,” Schuster said by phone from Chicago. Five out of eight Chinese IPOs listed in the U.S. over the past year have more than doubled since their debuts, such as 500.com Ltd., an online sports lottery operator, data compiled by Bloomberg show.