On August 21st, the Hong Kong stock market opened, and JD's stock price fell 11.5% to HKD 99.3. On August 20, Wal Mart said in a document submitted to the Securities and Exchange Commission of the United States that it would reduce its holdings of JD stock. As soon as the news came out, Wal Mart's share price rose slightly after the opening, while JD's share price fell sharply after the opening.
Foreign media quoted insiders as saying that Wal Mart is seeking to raise up to 3.74 billion dollars by selling its shares in JD, and plans to sell 144.5 million shares, with an issue price range of 24.85 to 25.85 dollars.
As of press release, JD and Wal Mart have not officially responded to this matter.
From increasing to decreasing holdings
According to JD's 2023 annual report, as of March 31, 2024, Wal Mart held 145 million Class A ordinary shares and 72 million American depositary shares of JD, with a total of 9.4% equity and 3.1% voting rights, making it the second largest shareholder of JD. Liu Qiangdong is the largest shareholder of JD.com, holding a total of 340 million shares, 11.2% equity, and 70.5% voting rights.
The cooperation between Wal Mart and JD began in 2016. On June 20, 2016, JD released an internal letter announcing that Wal Mart had become a strategic investor of JD Group, and the two sides had reached a deep strategic cooperation. By selling shares of No. 1 Store to JD, Wal Mart will obtain 145 million Class A ordinary shares newly issued by JD, which is about 5% of the total issued share capital of JD. JD will own the main assets of No.1 Mall, including the brand, website, and app of "No.1 Store", with an estimated transaction price of 1.5 billion US dollars.
At that time, all parties said that they would cooperate in multiple strategic areas. For example, JD would provide consumers with more abundant goods by virtue of Wal Mart's powerful global procurement and supply chain system and relying on JD's warehousing and logistics network. In addition, Wal Mart's physical stores in China will access the crowdsourcing logistics platform "Dada" invested by JD Group and the O2O e-commerce platform "JD to Home".
This transaction was able to make up for the category gap of JD's main electronic products at that time. After the news was released, JD's stock price rose at that time.
Since then, Wal Mart has also increased its stake in JD for many times, and the two sides have jointly launched investment in the logistics field. In October 2016, Wal Mart increased its shareholding in JD from 5.9% to 10.8%. Later, Wal Mart increased its holdings again. As of December 31, 2016, Wal Mart held 12.1% of JD Class A common shares. In 2018, Dada completed a round of financing of 500 million dollars, including Wal Mart's investment of 319 million dollars and JD's investment of 181 million dollars.
People close to JD disclosed to China First Finance that the two sides have achieved remarkable results in their respective set strategic goals over the past eight years of cooperation. Wal Mart has completed its e-commerce layout in China, and JD has also expanded its global supply chain capabilities. The business cooperation between the two sides has always been very smooth. Changes in equity investment will not affect the cooperation between the two sides at any business level. The two sides are still important strategic partners of each other. The two sides are also willing to continue to maintain close business cooperation and expand business in the domestic and international markets.
According to JD's Q2 financial report, JD's revenue reached 291.4 billion yuan, a year-on-year increase of 1.2%. The net profit attributable to common shareholders was 12.6 billion yuan, a year-on-year increase of 90.9%. Specifically for each category, the revenue of electronic products and household appliances in the second quarter decreased by 4.6% year-on-year, while the growth of daily necessities increased by 8.7% year-on-year. In addition, JD.com stated that the number of quarterly active users and user shopping frequency continued to maintain a double-digit growth trend in the second quarter, and the number of new third-party merchants increased by 46% compared to the first quarter.
What did Wal Mart get?
Some media quoted insiders who reported that Wal Mart planned to sell JD. O shares at a price of $24.85 to $25.85 per share, and Wal Mart sought to sell 144.5 million JD shares. According to the highest asking price, Wal Mart could raise $3.74 billion.
According to the ranking of Fortune Global 500 in 2024, Wal Mart still tops the list. In fiscal year 2024, Wal Mart's total revenue will be $648.125 billion, up 6% year on year; Net sales amounted to 642.637 billion US dollars, a year-on-year increase of 6.1%; The net profit was 15.511 billion US dollars, a year-on-year increase of 32.8%. Wal Mart's financial report as of the second fiscal quarter of fiscal year 2025 shows that Wal Mart's total revenue reached $169.335 billion, up 4.8% year on year; The net profit attributable to the parent company was 4.501 billion US dollars, a year-on-year decrease of 43%. In the first half of fiscal year 2025, the total revenue reached 330.841 billion US dollars, a year-on-year increase of 5.4%; The net profit attributable to the parent company was 9.605 billion US dollars, a year-on-year increase of 0.4%.
It can be seen that although Wal Mart's overall performance is good, its profit in the second fiscal quarter declined significantly year on year.
Some investors analyzed that this transaction should be Wal Mart's need to ease its own financial pressure. Because Wal Mart's income growth slowed in the second quarter, its cash flow decreased, and it also needed to make a diversification strategy in response to changes in the current market environment. In order to release resources, optimize capital allocation, the withdrawal of JD's equity investment is completely a normal capital operation, and does not involve the strategic cooperation between the two sides.
First Financial reporter called Wal Mart on this matter. As of press release, Wal Mart officials have not responded. However, a close source said that JD has always been an important partner for Wal Mart, and the decision to reduce its shareholding will help Wal Mart focus on the advantageous businesses of Wal Mart China and Sam's Club, and allocate funds to other priorities.
The reporter from China Business News has learned that Wal Mart has performed well in the Chinese market because of the relatively high profit formats such as membership stores. Although the hypermarket market has declined overall, the increase of membership stores has guaranteed Wal Mart's performance in China. At present, Wal Mart has also actively deployed membership stores in the Chinese market, and even transformed some hypermarkets into membership stores to strive for more profits.
"In those days, Wal Mart's in-depth equity cooperation with JD was largely due to the need for e-commerce business. At that time, Wal Mart's e-commerce business in the Chinese market was not very developed, and Sam's Club had independent online business, but it was also in its infancy and not very mature. After cooperation with JD, Wal Mart's online business and distribution would improve greatly. Of course, for JD, there was a retail giant ranking first in the global top 500 to cooperate, which was also a good supply chain cooperation. After so many years, both parties have made progress in e-commerce and supply chain. From the perspective of Wal Mart, now Sam's Club and related e-commerce affiliates Business has developed very well, and it is time to withdraw funds. If the transaction is completed and billions of dollars of revenue are obtained, it will also help Wal Mart's overall cash flow. After all, the overall competitive pressure and investment needs of the retail market are not small. " An insider analyzed the First Financial Journalist.