While most eyes have been as to the where and when of the Alibaba IPO, another Chinese e-commerce company called JD.com has come up on the rails and beaten Alibaba to the punch, as it gears up for its launch on the New York stock exchange tomorrow.
The Chinese on-line company is looking to raise $1.7bn and with a similar business model as Amazon.com Inc (NASDAQ:AMZN), selling directly to consumers, there does appear to be plenty of interest, with some estimates it could be 15 times oversubscribed.
It is a much smaller company than Alibaba, and unlike its bigger Chinese peer has yet to make a profit. The company intends to sell its shares between $16 and $18, valuing the company at $24.6bn, putting its valuation slightly above that of Amazon.
With Chinese authorities looking to rebalance their economy towards domestic consumption you would expect that the growth potential is definitely there, however the e-commerce business is extremely competitive and the company is coming from a long way back, but as of Q3 last year it was estimated that its market share was 18.3%.
One thing in its favour was a deal it signed in March this year with Tencent Holdings, the biggest internet company in Asia and owner of the WeChat message service, which gives JD.com access to an estimated 300m monthly active user base.
Given that Alibaba has been losing ground to Tencent (HK:0700) in the smartphone and tablet market this looks a shrewd move by JD.com, and could be a swing factor in whether the company is able to start making some decent profits, over the next few years.
Over the last few years it has managed to attract funds from some high profile investors as it is, in the form of the Saudi Talal Kingdom Holding Co, and the Ontario Teachers’ Pension Plan, so there does appear to be some potential there.
The key question is likely to surround as to when that potential might be realised, and whether or not it’s a better long term play than its more high profile and more expensive peer.
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