JD.com plunges more than 10% after hours, media reports that major shareholder Walmart seeks to sell 140 million shares

On Tuesday, August 20th, after the U.S. stock market closed, Chinese concept stock JD.com plummeted in after-hours trading, with a drop of more than 10% at one point.

After hours, JD.com did not make any official announcements. According to media reports citing informed sources, Walmart, the largest corporate shareholder of JD.com, is planning to sell 144.5 million shares of JD.com stock at a price range of $24.85 to $25.85 per share in a bulk transaction. Morgan Stanley is the securities broker accepting this transaction on behalf of Walmart.

Representatives from Walmart and JD.com have not commented on the above news. If the news is true, based on the reported high-end price, the transaction amount for Walmart will reach $3.74 billion, and even at the low end of the price range, Walmart will still receive $3.59 billion.

On Tuesday, JD.com closed down nearly 4.6%, moving away from the closing high set on June 12th after three consecutive trading days of gains earlier this week. Based on the closing price on Tuesday, the price at which Walmart is selling represents a discount of up to 11.8% compared to Tuesday's closing price, or at the low end of the range, Walmart's minimum discount is 8.3%.

As a shareholder holding over 5% of JD.com, Walmart has not submitted any filings to the U.S. Securities and Exchange Commission (SEC) disclosing the alleged plan to reduce its holdings on Tuesday.

Some media reports suggest that the 144.5 million shares Walmart plans to sell come from the JD.com equity it acquired when the company sold Yihaodian in 2016.

In June 2016, JD.com and Walmart jointly announced a deep strategic cooperation, with Walmart's Yihaodian merging into JD.com, and Walmart acquiring approximately 5% of JD.com's equity. According to the agreement reached by both parties at the time, Walmart acquired around 145 million Class A ordinary shares newly issued by JD.com, accounting for about 5% of JD.com's total issued shares. Based on JD.com's stock price at the time, the transaction price was approximately $1.5 billion.

Subsequently, Walmart's holdings in JD.com quickly rose, and by October 2016, the stake had exceeded 10%.

JD.com's 2023 annual report released earlier this year showed that as of March 31st this year, JD.com's founder Liu Qiangdong held a total of 11.2% of JD.com's equity and 70.5% of the voting rights, while Walmart held 9.4% of the equity and 3.1% of the voting rights.

Compared to the end of February last year, Liu Qiangdong's ownership of JD.com shares has decreased by 1.5 percentage points, and his voting rights have decreased by 3.4 percentage points, while Walmart's shareholding remains unchanged, with the percentage increasing by 0.2 percentage points and the voting rights increasing by 0.3 percentage points.

Just before the news broke on Tuesday that Walmart was seeking to sell over 100 million shares, JD.com had announced better-than-expected second-quarter financial results last Thursday.

In the second quarter, JD.com's operating income was 291.40 billion yuan, a year-on-year increase of 1.2%, higher than analysts' expectations of 290.51 billion yuan. The adjusted EBITDA for the quarter was 13.53 billion yuan, a 30% increase year-on-year, far exceeding analysts' expectations of 11.69 billion yuan After the financial report, JD.com's US stocks surged by nearly 8.5% last Friday, while JD.com's Hong Kong stocks rose by about 9%.

Although JD.com's second-quarter financial report was generally positive, Morgan Stanley subsequently released a report pointing out that amid weak consumption and increasingly fierce e-commerce competition, JD.com's revenue only increased by 1.2% year-on-year, which should draw market attention.

According to the Morgan Stanley report, in the first half of the year, JD.com and JD Retail's revenue increased by 3.9% year-on-year, slightly higher than the 3.7% growth rate of China's total retail sales of consumer goods announced by the National Bureau of Statistics. The report predicts that JD.com's revenue growth in the second half of the year will not show a significant recovery. In the third and fourth quarters, JD Retail's revenue is expected to increase by 4.4% and 4.7% respectively, with a full-year forecasted growth of 4.2%.

At the same time, Morgan Stanley cautiously lowered JD.com's revenue expectations, reducing the revenue forecast for 2025 and 2026 by 5% and 10% respectively, reflecting Morgan Stanley's conservative view on JD.com's recovery growth momentum in the intense industry competition