E-commerce platform Jd.com may launch IPO

Jd.com, a Chinese business to customer (B2C) e-commerce platform backed by Saudi Arabian Prince Alwaleed bin Talal, is reportedly seeking to launch an IPO in the second half of this year, which analysts said Thursday is an attempt to find a new venue of fundraising to further its business expansion.

When the Global Times Thursday reached out to jd.com via e-mail for comment, the company replied "We don't comment on market rumors."

Three unnamed sources were quoted by Bloomberg on Wednesday as saying that the company intends to raise $2 billion in the US stock market, but Hong Kong is also being considered as an option.

Jd.com has hired the Bank of America and the Swiss bank UBS to underwrite its IPO, said the sources. The two could not be reached for comment by press times.

It appears to be more beneficial for Jd.com to choose the US market, where its value is very likely to be estimated higher by investors, referring to its US veteran peers, such as Amazon, Feng Lin, an analyst at China E-Commerce Research Center, told the Global Times Thursday.

Jd.com's CEO, Liu Qiangdong, said at a press conference in late December that his company's revenue in 2013 is expected to reach over 100 billion yuan ($16.5 billion).

This can be compared to Amazon's revenue of $14.8 billion in 2007, and based on Amazon's average price-to-sales ratio of 1.85 from 2007 to 2013, Jd.com's estimated value can be recorded at some $30 billion currently, ranking fourth among Chinese Internet companies, wrote Yin Sheng, deputy editor-in-chief of Forbes China magazine, in late December.

Yin noted that Alibaba's current value is estimated as the highest in China, at an average estimate of $125 billion.

Alibaba, which runs two highly popular online shopping sites - B2C site tmall.com and C2C (customer to customer) site taobao.com, is also expected to launch an IPO worth over $15 billion, making it one of the Internet industry's largest, but the company has not determined the timeline or place.

According to the sources, jd.com wants to avoid listing at the same time as its largest rival Alibaba.

Jd.com's continuous losses and raising value hindered it from partnering with new strategic investors, therefore it really needs an IPO to further raise money, said Liu.

It seems that the company has already gained a lot of financial support from venture capital firms since 2007. A Thursday report by the Asian Venture Capital Journal said that jd.com has received $1.7 billion in private equity funding in the past two years and the recent investment it obtained, totaling around $400 million, was from a consortium led by Kingdom Holding, an investment firm run by Saudi Prince Alwaleed bin Talal, in February 2013.

Jd.com needs a steady flow of money to further its logistics network to second- and third-tier cities nationwide to attract more people to buy its flagship products - home appliances and consumer electronics goods, said Lu Zhenwang, founder of Shanghai Wanqing Commerce Consulting.

In terms of home appliances, jd.com has the competitive edge over Alibaba, but may still find it hard to overtake the latter mainly because its product range is not diversified enough and some of the products sold on jd.com are a little more expensive, Lu told the Global Times Thursday.

Data from Analysys International in October showed that tmall.com accounted for 49.2 percent of domestic B2C platforms' third-quarter sales volume, while jd.com came second with 18.3 percent.

Jd.com should further open its platform, specifically let third-party retailers handle the process of purchasing and stocking goods as well as reselling them to end users, which will enrich its products range and increase its profit margin, Lu said.