A view shows the logo of a Walmart store in Ciudad Juarez, Mexico, June 24, 2024. (REUTERS/Jose Luis Gonzalez)
HONG KONG, Aug 20 (Reuters) - Walmart has divested its entire stake in Chinese e-commerce giant JD.com, ending an eight-year investment. This move marks a shift in Walmart’s strategy as it aims to focus more on its own operations within China.
According to sources, Walmart's sale of the shares was fully subscribed, with the total value at the high end of the offering range reaching $3.74 billion. This decision comes as Walmart plans to concentrate on expanding its Sam's Club warehouse business in China. The sale highlights a broader trend where the once-booming Chinese e-commerce sector is struggling due to fierce price competition and sluggish consumer demand.
JD.com’s share price has plummeted roughly 70% from its peak in early 2021, returning to levels similar to those when Walmart first invested in 2016. In a statement, Walmart noted that the sale enables them to focus on their growing China operations and allocate resources to other priorities. The company emphasized its commitment to maintaining a commercial relationship with JD.com.
JD.com expressed optimism about future collaborations, despite the challenges. Walmart offered 144.5 million American depositary shares of JD.com at a price range between $24.85 and $25.85. This was a discount of up to 11.8% compared to the previous day's closing price of $28.19. Morgan Stanley handled the transaction but did not comment on the matter.
Following the news, JD.com’s shares dropped more than 10% in Hong Kong trading and fell 10% in after-hours U.S. trading. On the same day, JD.com repurchased $390 million worth of its shares as part of a $3 billion buyback plan approved earlier this year. The company had reported a stronger-than-expected profit for the second quarter, thanks to its low-price strategy, though the overall retail market in China remains weak, affected by a slowdown in the property sector and concerns over employment and income.
The competitive landscape has intensified as major e-commerce players like JD.com, Alibaba, and PDD Holdings’ Pinduoduo engage in aggressive pricing wars to attract consumers, impacting revenue and profit margins.
Jeffrey Towson, a Beijing-based partner at TechMoat Consulting, noted that while the sale allows Walmart to raise capital and refocus its efforts, it also preserves the potential for strategic partnerships, particularly in data sharing.
Walmart had held a 5.19% stake in JD.com, acquired in 2016 when it sold its Chinese online grocery business, Yihaodian, in exchange for a stake in JD.com. The U.S. retailer reported a 17.7% increase in revenue from its China operations, reaching $4.6 billion in the second quarter, driven by growth in its Sam's Club chain and digital services.
