JD takes China tech spinoffs to awkward new level

JD Logistics

31/03/2023 08:08

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are her own.)
    By Robyn Mak
       HONG KONG, March 31 (Reuters Breakingviews) - Investors
cheering for breakups across Chinese technology conglomerates
should be careful what they wish for. Just days after e-commerce
group Alibaba  BABA.N   9988.HK  announced a six-way split that
promises multiple listed entities to emerge from the parent, two
units from rival JD.com  JD.O   9618.HK  filed to go public in
Hong Kong. That would bring the number of listed JD businesses
to five in less than three years. It's not clear, though, that
the spinoffs have benefited the $65 billion parent or
shareholders.
    Jindong Property and Jindong Industrials are planning to
raise $1 billion each, according to Reuters. Both are niche
businesses: the former manages warehouses, data centres and
other logistics-type properties and derives roughly half its
annual revenue from JD itself; the latter is an e-commerce
business catering to industrial customers. The pair's combined
top line last year was just 1.5% of the parent's total.
    How the spinoffs can unlock value for JD is far from
obvious. The group's Hong Kong shares rallied 7% on the IPO
plans, yet they are still nearly 60% below their 2021 peak. Its
subsidiaries have not fared better: JD Logistics  2618.HK  and
JD Health International  6618.HK  are down by three quarters and
half respectively since their debuts. Moreover, JD.com's group
structure now looks unnecessarily messy, with four major
segments sitting atop nine divisions, some listed and some
unlisted. An affiliated financial technology, cloud and
artificial intelligence business, JD Technology, is also
awaiting regulatory approval for an up to $2 billion listing,
according to IFR. Hiving off businesses has merit if it is part
of a drive to maximise shareholder value. But there’s a beauty
to simplicity.
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    CONTEXT NEWS
    JD.com plans to spin off two businesses and list them on the
Hong Kong stock exchange in deals worth $1 billion each, Reuters
reported on March 31, citing sources.
    JD.com said it would continue to hold a stake of more than
50% in each unit, Jingdong Industrials and Jingdong Property,
upon completion of the proposed spin-off, according to filings
with the stock exchange operator on March 30. The size and the
timing of the deals have not been finalised yet.
    In December 2020, the company’s online healthcare unit, JD
Health International, raised HK$31 billion ($4 billion). Its
logistics arm, JD Logistics, raised HK$24.6 billion in May 2021.
    JD Technology, which houses JD.com’s financial technology
and cloud and artificial intelligence business, is also planning
a listing of up to $2 billion in a Hong Kong initial public
offering, according to IFR. The company in January 2022 filed
for the IPO with the China Securities Regulatory Commission but
is waiting for approval from the regulator on the overseas
listing.

 (Editing by Antony Currie and Katrina Hamlin)
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