Walmart Inc. says it’s looking to sell its entire stake in Chinese e-commerce giant JD.com, as the American retailer adjusts its strategy in the world’s second-largest economy.
Shares of the dual-listed JD.com plunged as much as 12% in Hong Kong on Wednesday after falling 10% in after-market trading on the Nasdaq overnight. In a statement sent to Forbes, a Walmart spokesperson confirmed the company’s intention to offload its 9.4% stake in JD.com. According to a Tuesday Bloomberg report, Walmart is looking to sell 144.5 million JD.com American Depositary Shares in a range of $24.85 to $25.85 apiece.
“This decision allows us to focus on our strong China operations for Walmart China and Sam’s Club, and deploy capital towards other priorities,” the spokesperson writes in an e-mailed statement.
Walmart stressed that it will continue to have a “commercial relationship” with JD.com, although it didn’t provide details. The American giant first acquired a 5% stake in the company in 2016 after selling its Yihaodian online marketplace to JD.com in a swap deal. It increased its stake to more than 9% because it wanted to work with JD.com – using its vast supply chain across the country – to sell groceries and other products online.
But JD.com now faces increased competition. PDD Holdings, founded in 2015, has managed to surpass JD.com in market capitalisation by attracting China’s budget shoppers with deeply discounted goods. Earlier this month, Colin Huang, PDD Holdings’s 44-year-old founder, became China’s richest man with a wealth of $50.8 billion. JD.com’s founder Richard Liu, 50, now has a net worth of $5.3 billion, according to Forbes estimates.
“Walmart first invested in JD.com to share the rapid growth of China’s e-commerce market,” says Shen Meng, a Beijing-based managing director of boutique investment bank Chanson & Co. “But now JD.com’s growth pressure has become bigger, as it faces challenges from PDD Holdings and other grocery delivery platforms. ”
JD.com didn’t respond to requests for comment. Liu, who has warned about the problems his company faces, and once called for change in an internal memo, has seen signs of a turnaround. In the second quarter, the company reported results that beat analyst estimates. Net income jumped 92.1% year-on-year to 12.6 billion yuan ($1.7 billion) during the three months that ended in June, while total sales rose 1.2% to 291.4 billion yuan. The company has been implementing its own low-cost strategy, offering promotions on products from groceries to home appliance to attract shoppers.
