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2021.05.30

JD.com Logistics shares volatile after $3.1bn Hong Kong IPO

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Shares in the supply chain and delivery unit of Chinese ecommerce group JD.com were volatile on their trading debut as an initial surge fizzled out following a $3.1bn initial public offering in Hong Kong. JD Logistics is a spin-off similar to US tech group Amazon’s logistics arm.

 

The company delivers 90 per cent of packages on the same or next day for parent JD.com, its largest customer, but it is increasingly focusing on providing delivery and logistics services to third-party customers. The IPO came as the Chinese government steps up scrutiny of the country’s tech sector. JD Logistics’ shares rose as much as 18 per cent before trimming gains in afternoon trading, closing 3.3 per cent higher. That left the Beijing-based company with a market capitalisation of about $33bn.

 

While the unit has benefited from a boom in online shopping during the Covid-19 pandemic, its IPO fell short of expectations compared to when the company first submitted its listing materials several months ago. “The capital markets were hot at the time,” Yu Rui, chief executive of JD Logistics, told the Financial Times.

 

“For JD Logistics, our IPO is just a point in time, it’s not the end point . . . if the [price] is in a reasonable range, I think it’s OK.” Analysts said the fall stemmed from a decline in the share price of rival SF Holdings and mounting losses at JD Logistics as it invests heavily in infrastructure.  The group has added about 200 warehouses in the past six months. Its operating loss widened to Rmb1.5bn ($235m) in the first quarter as revenue rose 64 per cent year on year to Rmb22.4bn. “In the final prospectus, they said they were going to lose a bunch of money in 2021, so estimates went down,” said one Hong Kong-based analyst. 

 

The IPO is also the second big spin-off for JD.com, whose health unit raised $3.5bn in a Hong Kong IPO in December. JD.com’s fintech arm pulled its proposed IPO on Shanghai’s Star market last month amid the regulatory crackdown.