During the financial year 2020, JD Logistics arm reported revenue of approximately $11 billion.
JD Logistics shares closed Hong Kong IPO debut trading at HK$41.70, up 3.3% from the opening price. JD Logistics is a spin-off from the Chinese e-commerce firm JD.com Inc (NASDAQ: JD). Notably, JD Logistics shares had risen as much as 18% during the Hong Kong trading hours.
Consequently, JD shares on Nasdaq tweaked approximately 0.23% during the Friday pre-market session to trade around $73.00. Notably, JD Logistics raised approximately $3.2 billion mostly from retail investors and will use the funds to develop infrastructure for logistics according to CEO Yu Yui.
“We are going to use the funds raised from the IPO to further improve our networks, including in the lower-tier and suburban areas in China, and the infrastructure of the overseas markets,” Yui said.
JD Logistics Shares and Market Outlook
According to Kingston Securities executive director Dickie Wong, the huge demand for JD logistics shares led to the increased volatility during the Hong Kong trading hours. Furthermore, a small portion of the retail traders got a hold of the JD Logistics shares according to the company’s filings. According to the IPO regulatory filings, out of 1.36 million applications for JD Logistics shares, only 289,004 or approximately a fifth of the applicants were successful. A clear testimony of JD market dominance and demand in the Chinese market.
The market declined at the end of the day as traders rushed to take profits after buying low. “There was a lot of retail investor interest in this deal so when those people see the stock is starting to fall they will start to divest because they want to take their profits,” Wong told Reuters.
The company has seen tremendous growth thanks to its same or next-day delivery system. JD Logistics has significantly invested in the technology aspect thus giving it an edge over its competitors including Alibaba Group Holding Ltd (NYSE: BABA).
However, worth noting is that almost all Chinese e-commerce companies have heavily invested in artificial intelligence and robotics to capitalize on the growing market. Hereby, competition is expected to heighten in the coming years and the slightest difference in service delivery could reciprocate to the winning party.
Investors, however, remain worried about a continued trend in the reported adjusted losses. Whereby the company reported net losses of 4 billion yuan in 2020, greater than the 2.2 billion yuan in 2019. During the financial year 2020, JD Logistics arm reported revenue of approximately $11 billion.
The company now seeks to go independent from its parent company and use the funds to diversify its revenue collection.