JD Seeks $1.5B Brokerage Stake Acquisition To Boost Financial Services Operations: Reuters

Ecommerce firm JD.Com Inc (NASDAQ: JD) is contemplating the part or complete stake acquisition in brokerage Sinolink Securities valued at a minimum of $1.5 billion to boost its financial services operations, Reuters reports.

• The stake acquisition from Sinolink’s largest shareholder, Yongjin Group, would mark the biggest wager based on acquisition value by JD in the $45 trillion Chinese financial markets.
• The valued brokerage license is the key for tech giants to mint their huge online traffic and grow into bigger firms.
• A 27% stake would be worth about 10 billion yuan based on Sinolink’s market value of $6 billion (39 billion yuan) on Thursday.
• Sinolink shares jumped by their maximum 10% daily limit on Friday afternoon after Reuters reported the discussions.
• Presently, Chinese tech majors are keen on expansion into financial services despite a regulatory crackdown on some parts of the sector.
• Chengdu-based Sinolink was just outside the top 20 biggest brokerages in China by operating revenue in 2019. Sinolink’s business included stockbroking, sponsoring and underwriting equity and debt deals, financial advisory, and wealth management.
• China’s Alibaba Group Holding Ltd (NYSE: BABA) and Tencent Holdings Ltd (OTC: TCEHY) hold stakes in the country’s leading investment bank, China International Capital Corp. Alibaba also invested in large broker Huatai Securities, while Tencent sponsored Hong Kong-based online brokerage Futu Holdings.
• The potential deal would satisfy the privately run Yongjin’s plan to divest its financial services business to evade new regulations on financial holdings firms.
• The new rules entail a capital threshold for companies that operate more than two types of financial business. A failure after a one-year grace period can amount to a forced share sale.
• Price action: JD stock was down 3.7% at $86.68 in the pre-market session on the last check Friday.