JD Logistics, the JD.com delivery spin-off, completed its listing on the HKEX on 28 May 2021, raising about HKD24.1 billion (USD3.1 billion) with the final pricing, giving it a total market capitalisation of USD35 billion and making it China’s second-largest logistics company to SF Express by value to date.
Shihui Partners and Maples Group acted as PRC and Cayman Island counsel, respectively, to the issuer, and Skadden acted as Hong Kong and US counsel. For the sponsors and underwriters, Cleary Gottlieb advised on Hong Kong and US law, and Han Kun Law Offices advised on PRC law.
As the fourth listed company under JD.com, the valuation of the delivery arm exceeds that of the parent company during its own US listing in 2014. With revenue highly dependent on its parent, the company has generated discussion about its valuation and profitability. The prospectus shows that 56.6% of JD Logistics’ total revenue in the first three quarters of 2020 still comes from JD.com.
JD Logistics’ listing could gradually change how investment banks value logistics companies, from the traditional P/E (price to earnings) ratio route to valuation by P/S (price to sales) ratio, putting an emphasis on future expectancy.
The development strategy of internet platform companies – scaling in the early stage, and optimising cost and profiting gradually in the later stage – has been increasingly recognised by the market. Coming from such a background, as some analysts point out, JD Logistics will reach a trillion-level market space with its current market-leading revenue growth rate.
“The successful listing of JD Logistics is a good reflection of the market’s recognition,” said Zhang Jian, the Beijing-based lead partner from Shihui Partners. “In the long term, both JD.com and JD Logistics are looking very positive in the capital market.”
Freeman Chan, the lead partner from Cleary Gottlieb in Hong Kong, agrees that this IPO indicates a strong and continued investor interest in leading Chinese technology companies.
“JD.com has heavily invested in JD Logistics for over a decade,” said Chan. “The spin-off and the separate listing provide JD logistics with direct and independent access to the capital markets, which enables JD Logistics to compete more effectively in its industry.”
The turnaround time was quite short, considering the huge scale of JD Logistics. “The whole project took only about six months from launch to listing,” said Zhang.
Faced with the challenge of “tight timelines and heavy workloads”, Wang Jin, the Beijing-based lead partner from Han Kun Law Offices, points out that in the relatively more procedural project of an IPO, it was the close co-operation among all advisers that laid a solid foundation for the efficient completion of the project.
Since 2020, Skadden, Shihui, Maples Group and Han Kun have all been involved in three projects: JD.com’s Hong Kong secondary listing, and both IPOs of JD Health and JD Logistics.
“Our long-term co-operation made it easy for us to grasp each other’s work routine and styles, and to understand what we need from one another, and how others handle issues,” said Wang, “The three projects enabled us law firms to develop a good understanding for one another, which reduced a lot of communication costs.”