JD.com Raises $2.5 Billion To Expand Logistics Network In China – Investor's Business Daily

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China e-commerce leader JD.com (JD) raised $2.5 billion by selling a stake in its logistics unit in order to expand its supply-chain network with leading-edge technology, the company announced Wednesday.

X The funding round sets the stage for JD.com to invest in technologies that include drones, robotics and various forms of automation, it said. The move also comes at a time when other e-commerce companies such as Alibaba Group (BABA) and Amazon (AMZN) are spending heavily in logistics to expand their delivery network and boost revenue by offering third-party services.

Shares of JD.com were up 4.3%, near 46.50, during morning trading on the stock market today. JD.com stock surged last month after a report from Bloomberg said the company was planning an expansion into U.S. markets, seeking to get a step ahead of China archrival Alibaba and also challenge Amazon on its home turf. JD.com has said it would start online sales in the U.S. by the second half of 2018.

Investors in the funding round include China internet giant Tencent Holdings (TCEHY), Sequoia Capital, Hillhouse Capital, China Merchants Group and various other China finance entities. JD.com will now hold an 81.4% stake in JD Logistics, which has an estimated valuation near $11 billion.

JD.com is the largest internet company in China by revenue and competes primarily against Alibaba in the e-commerce field. Alibaba, though smaller by revenue, handles a larger amount of gross merchandise volume.

Tencent is China’s leader in mobile messaging services in addition to gaming. JD.com and Tencent have partnered in several deals. In December, JD.com and Tencent announced they will invest $863 million in Vipshop Holdings (VIPS), a large China e-commerce discount retailer. Vipshop reported fourth-quarter earnings late Monday that beat the consensus estimate, as revenue rose 27% to $3.7 billion.


IBD’S TAKE: Shares of JD.com are up for the fourth straight day, having reached a record high of 50.68 on Jan. 29. It holds an IBD Composite Rating of 95 out of a possible 99 and a Relative Strength Rating of 74. Visit IBD’s page on the Best Chinese Stocks To Buy And Watch to stay on top of the latest movers and shakers in China.


JD.com spun out its logistics unit into separate business in April, part of a broader reorganization that could lead to an initial public offering. It’s similar to what Alibaba did with its logistics business called Cainiao.

“Over the decade that we have built out our operations, initially to support our own e-commerce business, we have created the most efficient, integrated and user-friendly logistics network in China,” said Zhenhui Wang, the chief executive officer of JD Logistics, in prepared remarks with the announcement. The funding will enable JD Logistics to build “China’s next-generation commercial infrastructure ecosystem,” he said.

JD.com is scheduled to report quarterly earnings on March 2. It reported third-quarter results in November that topped estimates and sent the stock soaring. Revenue rose 39% to $12.6 billion.

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