JD.com is planning a $1 billion note offering to refinance and fund general operations, according to a filing to the US Securities and Exchange Commission on Tuesday.
Why it matters: The Beijing-based e-commerce company is joining other domestic tech firms in seeking out cheaper capital as China’s economic slowdown continues. Alibaba’s blockbuster $13 billion secondary IPO in Hong Kong set a precedent for its peers.
- JD raised $1 billion in its 2016 debut on the global bond market. The first five-year $500 million tranche offered at a 3.125% rate will be due in around a year.
- US-listed Chinese tech firms including search engine Baidu, online travel booking platform Trip.com, and gaming firm Netease are reportedly proceeding with secondary listings in Hong Kong.
- In addition to Alibaba, rival e-commerce platform Pinduoduo raised new capital with its $1 billion convertible debt offering in September.
Details: The public offering consists of $700 million of 3.375% notes due in 2030 and $300 million of 4.125% notes due in 2050, according to the filing.
- The notes are expected to be listed on the Singapore exchange.
- The company expects to receive net proceeds from the offering of approximately $988.3 million, after deducting underwriting discounts, commission, and expenses.
- Bofa Securities and UBS are joint book runners for the deal.
“As Alibaba and Tencent have been actively expanding their ecosystems, issuing $1 billion notes gives JD more financial flexibilities and lowers its cost of capital; It puts the company at a stronger financial position to acquire new businesses.”
—Deborah Weinswig, analyst at research institute Coresight Research, in written response to TechNode
Context: JD recorded net revenue of RMB 134.8 billion ($18.9 billion) in the third quarter of 2019, an increase of 28.7% year on year and the highest quarterly growth for the past five quarters.
- The company is reportedly in early discussions with banks for an overseas listing of its logistics affiliate, JD Logistics.
- Founder and CEO Richard Liu last year stepped down from a series of top management roles at the company’s subsidiaries last year.
Updated: included additional information about the company’s 2016 bond offering and analyst comment.