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Is JD Logistics Ripe for an IPO?

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JD Logistics raising $2.0 billion in new capital

According to a January 15, 2018, Reuters report, JD.com (JD) initiated an ~$2.0 billion fundraising round for its logistics unit, JD Logistics. In 2017, JD separated its logistics unit into a separate business, similar to Alibaba’s (BABA) separate logistics partnership with Cainiao. However, JD still owns 100.0% of JD Logistics.

The fundraising round that JD has opened for JD Logistics is viewed as part of a broader reorganization that could eventually result in an IPO (initial public offering) of the logistics unit. This move signals a departure from the path JD pursued with JD Finance, which is its finance unit that it spun off in 2017. JD spun off the finance unit but stated that it didn’t intend to take it public just yet.

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$10 billion business

The fundraising round is said to value JD Logistics at roughly $10.0 billion. JD Finance was valued at ~$8.0 billion at the time of the spin-off.

The JD Logistics fundraising round comes at a time when e-commerce companies such as China-based (MCHI) JD.com, as well as US-based (SPY) Amazon (AMZN) and eBay (EBAY), are doubling down on logistics investments to expand their delivery networks.

JD.com utilizes drones to help streamline deliveries of customer orders at a time when delivery speed is reshaping e-commerce competition. JD has also made several logistics investments overseas, especially in Southeast Asia, as part of its global push.

Attracting third-party business

The spin-off of JD Logistics, which JD has worked to strengthen in recent years, is expected to make it easier for the unit to attract third-party delivery businesses. This trend could bring more revenue for JD.

JD’s revenues increased more than 39.0% year-over-year to 83.7 billion yuan (or $12.6 billion) in 3Q17, as shown in the graph above.

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