Walmart has sold its entire US$3.7-billion stake in JD.com, ending an eight-year investment that was yielding waning returns. The move comes as competition for online shoppers’ money in China has led to steep discounts from companies like JD.com and Alibaba, which has squeezed their margins. Walmart said it would focus on its strong China operations for Walmart China and Sam’s Club, and deploy capital towards other priorities.
Walmart invested in JD.com in 2016 by selling its Chinese online grocery store Yihaodian to JD.com in return for a 5% stake in JD.com itself. In the same year, Walmart raised its holdings in JD.com to more than 10%. Shares of JD.com have fallen around 70% from their peak in early 2021 and prices are close to the levels in 2016. JD.com sales growth has stagnated after the pandemic as shoppers have flocked to rival low-cost e-commerce firm Pinduoduo.
The US retailer’s share sale was fully subscribed and would be worth US$3.74-billion at the top end of the offered range. JD.com said it was confident about the future co-operation between the two companies. As part of the original contract, Walmart and JD.com worked together to leverage their supply chains, broadening the range of imported products for Chinese consumers.
Walmart offered 144.5 million American depositary shares of JD.com in the price range of US$24.85 to US$25.85, with Morgan Stanley being the broker-dealer of the offering. The stake sale allows Walmart to raise capital and refocuses JD.com on its core online business, but a strategic partnership between the pair can continue, especially in data sharing.
Source: Globe and Mail
