JD.com shareholders raised $619 million in a share sale on Wednesday, offloading roughly 26 million ADRs in the Chinese online retailer.
DST Global Funds, Best Alliance International Holdings and Hillhouse Capital sold the units at $23.80 each, marking the first secondary placement for the company after its highly successful Nasdaq flotation.
The shareholders initially sought to offload 21.8 million shares but the deal was increased, an indication of strong demand.
Allocations were still being finalised late Wednesday under the leads of Bank of America Merrill Lynch and UBS. China Renaissance, Barclays and Jefferies acted as co-managers.
Although hedge funds made up the bulk of the demand at 70%, only 40% of the deal was allocated to hedge funds, according to a source close to the matter. The issuer gave preference to institutional investors, with long-onlys accounting for 60% of the final book.
Geographically, Asian funds accounted for 30% of the deal, while 70% was allocated to the international tranche, with US funds taking up the bulk of this tranche.
DST, Best Alliance and Hillhouse were likely trying to cash in on market gains, even though the share price has retreated in recent weeks.
JD.com is up 16% from its market debut but has declined 32% since peaking at $32.40 per unit on August 27. The share price has fallen 9% just since November 24, when the news first hit markets that JD.com's shareholders were looking to offload over 20 million ADRs.
Technology bellwethers have been mixed this year. Alibaba is up an impressive 61% from its September 18 listing but Amazon, a close comparable of JD.com, is still down 18% year-to-date despite recent gains.
Net loss
Although JD.com reported a 61% year-on-year increase to Rmb29 billion ($4.7 billion) in third-quarter net revenues it incurred a net loss of Rmb164.4 million. That compares with a net loss of RMb75 million for the same period last year.
JD.com executives blamed the bigger net loss on acquisitions related to its strategic partnership with Tencent. The latter purchased a 15% stake in JD.com in March and purchased a further $1.3 billion in a private placement at the IPO price, increasing its stake to 20%. The partnership allowed JD.com to tap into Tencent's WeChat messaging service, which would allow it to boost traffic to its online stores and increase revenues.
WeChat remains China's dominant messaging service but it is not growing as quickly as Tencent initially anticipated. It had 468 million users in the third quarter, a 6.8% rise on the previous quarter and the lowest increase it has seen since Tencent began reporting numbers.
JD.com raised $1.8 billion via its initial public offering on Nasdaq in May. It was at the time the largest US stock market listing by a Chinese company and is regarded by many as one of the year's most notable deals.
Initially marketed at a range of $16 to $18 per share, strong demand subsequently allowed the group to sell 93.7 million ADRs at $19 per share.
The institutional book closed 15 times oversubscribed, with more than 500 lines in the book. Some market observes regard JD.com as the best IPO of the year since it paved the way for Alibaba's subsequent record breaker.
