Walmart, the largest shareholder of Chinese e-commerce giant JD.com, has sold its entire stake in the company, according to a source familiar with the matter. The sale, which marks the end of an eight-year investment, was fully subscribed and is estimated to be worth $3.74 billion at the top end of the offered range. The U.S. retail giant’s decision to divest its shares in JD.com reflects a strategic shift to concentrate on its own operations in China, particularly its Sam’s Club warehouse business.
The move comes as China’s e-commerce sector, once a highly attractive investment, faces increasing challenges due to intense price competition and weakened consumer demand, leading to poor profit margins. JD.com, in particular, has seen its stock value decline by approximately 70% from its peak in early 2021, with current prices barely above the levels seen when Walmart first acquired its stake in 2016.
Walmart offered 144.5 million American depositary shares of JD.com in a price range between $24.85 and $25.85, according to a term sheet. This offering represented a discount of up to 11.8% compared to JD.com’s closing price of $28.19 on Tuesday. Morgan Stanley acted as the broker-dealer for the sale.
Following the announcement, JD.com’s Hong Kong-listed shares fell by more than 10%, while its U.S.-listed shares dropped by 10% in after-market trading to $25.50. In response, JD.com repurchased shares worth $390 million as part of a $3 billion buyback plan approved earlier this year.
Despite the sale, Walmart emphasized its ongoing commitment to a commercial relationship with JD.com. The company stated that the divestment would allow it to focus on strengthening its China operations, particularly through its Walmart China and Sam’s Club brands. JD.com also expressed confidence in the future collaboration between the two companies, particularly in areas like data sharing.
Walmart’s decision to divest its 5.19% stake in JD.com comes at a time when the Chinese retail market is grappling with a downturn in consumer confidence, largely driven by a property market slowdown and concerns over employment and incomes. Major e-commerce players like JD.com, Alibaba, and Pinduoduo have been locked in a fierce price war, which has put pressure on revenue growth and profit margins.
In contrast, Walmart reported a 17.7% year-on-year increase in revenue from its China operations, totaling $4.6 billion in the second quarter, driven by robust growth in its Sam’s Club warehouse chain and its digital offerings. The sale of its JD.com stake enables Walmart to raise capital and better align its resources with its strategic priorities in China.
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