Alibaba rival JD.com files for U.S. listing

Fri Jan 31, 2014 3:52am IST

Chen Honglei, a 26-year-old courier of Jingdong, also known as JD.com, prepares his electric tricycle before leaving the company's Haidian district delivery station in Beijing, November 20, 2013. REUTERS/Paul Carsten/Files

Chen Honglei, a 26-year-old courier of Jingdong, also known as JD.com, prepares his electric tricycle before leaving the company's Haidian district delivery station in Beijing, November 20, 2013.

Credit: Reuters/Paul Carsten/Files

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REUTERS - JD.com, China's second-largest e-commerce company, filed for a U.S. listing of its shares, following market leader Alibaba Group Holding Ltd IPO-ALIB.N in tapping into rising investor enthusiasm surrounding China's booming online retail market.

Appetite for Chinese technology stocks recovered in 2013 after a series of accounting scandals dried up U.S. listings in 2011 from a high of 40 in 2010.

JD.com, which filed a placeholder of up to $1.5 billion on Thursday, has grown exponentially over the past years and said in December it would top its 100 billion yuan annual sales target in 2013.

China's business-to-consumer e-commerce sales may surpass $180 billion this year due to rising internet penetration, expanding middle-class incomes and a steadily improving distribution network, according to New York-based market research firm eMarketer.

This potential has attracted global retailing giants such as Wal-Mart (WMT.N) and Amazon Inc (AMZN.O) to China, which is soon expected to overtake the United States as the world's biggest online retail market.

"Investors are very hungry for the piece of consumer e-commerce space in China," Francis Gaskins, a partner at IPO research company IPODesktop.com, told Reuters

JD.com and other web-based retailers, however, operate in the sizeable shadow of Alibaba, which controls nearly 80 percent of the country's internet shopping market. Alibaba is expected to go public this year in what is billed as the biggest IPO since Facebook Inc's (FB.O) 2012 float.

In an interview with Reuters in December, Shen Haoyu, JD.com's chief operating officer, said the timing of the Alibaba IPO was not a consideration for his company's IPO.

JD.com, earlier known as 360Buy, has raised $2.23 billion in the past six years from investors including the Ontario Teachers' Pension Plan and Saudi billionaire Prince Alwaleed bin Talal's Kingdom Holding Co 4280.SE

The company's founder and CEO, Richard Liu, has a 46 percent stake in JD.com. Other shareholders include hedge fund Tiger Global Management and DST Global funds.

Josef Schuster, founder of IPOX Schuster, a Chicago-based IPO research and investment house, said investors would "flock" to the deal if it is priced at a valuation of $10-$13 billion.

In September 2011, IFR, a Thomson Reuters publication, said JD.com was planning to raise $4-$5 billion through a U.S. IPO.

Local media reports in late 2012 valued the company at $7.3 billion after a $400 million round of funding.

"Big gains of other China-linked IPOs in the U.S. have left a good taste in investors' mouths," Schuster said in a note to Reuters.

STRONG GROWTH

JD.com has tried to differentiate itself by operating its own network of couriers and warehouses, a factor it says ensures timely and efficient delivery.

Alibaba still depends on merchants and external courier firms for their logistics.

JD.com, which listed BofA Merrill Lynch and UBS Securities LLC as underwriters to the offering, posted a profit for the first nine months of 2013 after a string of losses, according to the IPO filing. (r.reuters.com/myc56v)

It had 35.8 million active customer accounts and processed 211.7 million orders in the first nine months of 2013. Total net revenue jumped 70 percent to $8 billion in the period.

Expectations have been building for months around Hangzhou-based Alibaba, with bankers predicting an IPO that could raise up to $15 billion and value the company at more than $100 billion - sums that have drawn comparisons to the frenzied Facebook offering in 2012.

JD.com, like a number of other Chinese companies listing in the United States, relies on a little-tested legal structure called "variable interest entity" (VIE) that gives an investor economic interest but no ownership.

The structure helps companies bypass Chinese government bans on foreign ownership in some business sectors.

Shares of Chinese car sales website Autohome Inc (ATHM.N), which also has a VIE structure, surged as much as 83 percent when they listed in December.

JD.Com's filing with the U.S. Securities and Exchange Commission did not reveal how many American Depositary Shares the company planned to sell, their expected price or the exchange on which it would list them.

(Additional reporting By Neha Dimri in Bangalore and Adam Rose in Beijing; Editing by Saumyadeb, Chakrabarty, Don Sebastian and Maju Samuel)

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