JD Logistics Sets IPO Price, Eyes $3.4B Valuation

On Monday, JD Logistics, the supply chain spinoff of JD.com JD, set its Hong Kong IPO price between $HK39.36 and $HK43.36 for a total of 609.1 million shares. This pricing could lead to a $3.4 billion valuation for the company.  

JD.com plans to hold 10% of JD Logistics' shares, according to the new filing.

The listing would also provide an over-allotment option that would provide another 91 million shares, raising an additional $510 million.

Joint sponsors for the IPO include BofA Securities Inc., Goldman Sachs Group Inc. GS and Haitong International Securities Ltd.

Cornerstone investors include Softbank Vision Fund, Temasek Holdings Pte., Blackstone Group Inc. BX, Tiger Global, China Chengtong Holdings Group Ltd., Matthews Asia and Oaktree Capital. According to the terms, they have agreed to $1.53 billion in stock.

According to the prospectus, the final price will be set on Friday, with trading expected to begin on the Hong Kong Stock Exchange on May 28.

JD Logistics Network

JD.com has invested heavily in its in-house logistics unit, taking a net loss of $618 million over the last year. That investment has created the ability to deliver 90% of orders within the same or next day to 99% of mainland China.

In order to pull off this feat, the company has a network of 190,000 full-time delivery drivers to complete final-mile deliveries. While this network has created greater efficiencies for the company compared to its rivals like Alibaba, it has cost the company up to three-quarters of JD Logistics' total business expenditures, according to a report.

In order to control human capital costs and growing concerns over adequate pay and employees' hectic schedules in order to achieve its same-day delivery standards, JD Logistics has continuously invested in automating its delivery services.

According to its prospectus, the company operates 28 smart mega warehouses, including one that is fully unmanned. It also holds 2,500 automation technology patents and has been the first company to apply Level 4 autonomous driving on public roads without human interaction.

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