By Kane Wu, Summer Zhen
HONG KONG (Reuters) – Walmart has sold its entire stake in JD.com worth about $3.7 billion, ending an eight-year investment in the Chinese e-commerce company that had been generating only modest returns. The U.S. retail giant also said it would focus on its own operations in China.
The move comes as competition for online shoppers’ money in China has led to deep discounts at companies such as JD.com and Alibaba, which in turn has led to a decline in their margins.
“This decision allows us to focus on our strong China businesses for Walmart China and Sam’s Club and deploy capital to other priorities,” Walmart said in a statement, adding that it is committed to a continued business relationship with the Chinese company that offers Walmart goods on its website.
Walmart invested in JD.com in 2016 by selling its Chinese online grocery store Yihaodian to JD.com in exchange for a 5% stake in JD.com itself. That same year, Walmart increased its stake in JD.com to over 10%.
JD.com shares have fallen about 70% since their peak in early 2021, and prices are close to 2016 levels. JD.com’s revenue growth stagnated after the pandemic as shoppers migrated to rival low-cost e-commerce company Pinduoduo.
The US retailer’s shares are fully subscribed, a person familiar with the matter told Reuters on Wednesday. At the upper end of the offer range, they would be worth $3.74 billion.
“Walmart wanted to get into China in 2016 and learned the retail business there,” said Thomas Hayes, chairman of investment firm Great Hill Capital. “They did it and expressed their interest through JD. Now they have their own presence and their own interests in China and no longer need a minority position in JD when they have a great business of their own.”
JD.com expressed confidence in a statement on Wednesday about future cooperation between the two companies. Under the original agreement, Walmart and JD.com worked together to optimize their supply chains and expand the range of imported products available to Chinese consumers.
JD.com’s Hong Kong-listed shares closed nearly 9 percent lower on Wednesday. The U.S.-listed shares lost 5 percent in midday trading.
Walmart shares rose 0.6% on Wednesday after hitting a record high of $75.58.
In the last quarter, Walmart reported a 17.7% year-on-year increase in sales in its China business to $4.6 billion, driven by strong growth in its Sam’s Club warehouse chain and its digital offering.
Membership revenue from Sam’s Club’s China business increased 26% as membership numbers continue to grow. The company operates about 48 clubs in China.
Walmart offered 144.5 million American depositary shares of JD.com in the range of $24.85 to $25.85, according to a term sheet seen by Reuters. Morgan Stanley was the broker-dealer for the offering.
The shares were offered at a discount of up to 11.8 percent to Tuesday’s closing price of $28.19. Morgan Stanley did not respond to a request for comment.
The stake sale will allow Walmart to raise capital and refocus JD.com on its core online business, but the strategic partnership between the two companies may continue, particularly in data sharing, said Jeffrey Towson, a Beijing-based partner at TechMoat Consulting.
(Reporting by Kane Wu and Summer Zhen in Hong Kong, Sophie Yu in Beijing; Ananya Mariam Rajesh, Aishwarya Venugopal and Chandni Shah in Bengaluru; Additional reporting by Deborah Sophia; Editing by Jamie Freed, Janane Venkatraman, Devika Syamnath and Sayantani Ghosh)
