China's JD.com preps $1.5B IPO in US
China's second-largest online retailer, JD.com, is prepping its IPO in what is touted to be the biggest of its kind in the U.S. market.
The e-commerce site has filed to raise US$1.5 billion in its U.S. initial public offering, the largest involving a Chinese online company, according to a China Daily report. The IPO filing did not indicate the volume of American depositary shares it planned to sell, or expected share price or exchange on which the shares would trade.
The company said it had identified US$1.5 billion as a placeholder in order to calculate fees, adding that this number could be further tweaked. Funds raised will be used to acquire more land, build warehouses, expand its distribution network, and ink acquisition deals. It currently operates 82 warehouses and 1,453 delivery stations across China.
Its filing referred to a recent ruling by U.S. Securities and Exchange Commission (SEC), recommending a six-month suspension for the four Chinese units of the big four accounting firms, as a risk factor. JD.com said its audit firm, PricewaterhouseCoopers' Shanghai-based subsidiary, was one of the four firms facing potential suspension, noting that its IPO filing could be "adversely affected by the outcome of the proceedings".
The firms were alleged to have violated U.S. laws after refusing to hand over certain client documents for inspection to aid in SEC investigations of possible fraud. In response, the Chinese units said they were merely abiding by their local laws which regard audit documents as "state secrets".
Bank of America Merrill Lynch and UBS will be managing JD.com's IPO. Its filing comes ahead of rival Alibaba's own IPO plans, which has been highly anticipated to take place this year and raise up to US$75 billion, surpassing that of Facebook's 2012 offering. China's largest search company, Baidu, raised US$122 million in its New York IPO in 2005.
The China Daily report said JD.com aimed to differentiate itself from Alibaba by running its own network of couriers and warehouses, as this will enable the company to provide a more efficient delivery. In comparison, Alibaba relies on merchants and third-party courier companies to fulfil its logistics requirements.
In its IPO filing, JD.com said it currently has 35.8 million active customer accounts, and processed 211.7 million transactions in the first nine months of 2013, during which it reported a profit after two years of losses and saw its revenue climb 70 percent to US$8 billion.
Founder and CEO Richard Liu owns a 46 percent stake in the company, which he founded a decade ago, while Tiger Global Management holds 22 percent and Saudi billionaire, Prince Alwaleed bin Talal's Kingdom Holding has about 5 percent.
Greater China is expected to see record IPOs this year with at least 50 companies to be approved for listing in January, led by sectors including technology and healthcare. According to a report by Ernst & Young, IPO activities would remain robust in the first quarter of 2014, following a strong showing in the last quarter of 2013 which clocked a total of 864 deals generating some US$163 billion.
The Chinese e-commerce market in 2013 was forecast to overtake the U.S., growing an average 71 percent between 2009 and 2012, compared to 13 percent in the U.S. market. It will chalk up 3.3 trillion yuan (US$539 billion by 2015, consultancy firm Bain & Co. predicted.