Vipshop Enjoys 10% Boost After Tencent and JD.com Close Investment

Vipshop Holdings Ltd. climbs another 10 percent after Tencent and JD.com disclose they completed their previously announced share purchase for $13.08 per ADS.

Peter H. Frank
    Jan 08, 2018 4:11 PM  PT
Vipshop Enjoys 10% Boost After Tencent and JD.com Close Investment
author: Peter H. Frank   

Vipshop Holdings Ltd. enjoyed a 10-percent runup today in New York trading after separate regulatory filings showed Tencent Holdings Ltd. and JD.com Inc. completed the purchase of stakes in the e-commerce company.

While both moves had been previously announced, the price of Vipshop ADSs had languished below the equivalent $13.08 per ADS the companies agreed to pay for the shares. The terms of the agreement, which had been disclosed in mid-December, called for them to pay $65.40 per ordinary share. Five ADSs represent one Class A ordinary share.

Vipshop (NYSE: VIPS), a leading online discount retailer in China, closed today at $13.58 per ADS, up $1.21 per share, or 9.8 percent.

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According to the filings with the Securities and Exchange Commission, Tencent purchased 9.23 million newly Class A ordinary shares for $603.6 million in cash. Tencent currently owns a 7-percent stake in Vipshop. For its part, JD.com said it purchased 3.96 million newly issued Class A ordinary shares for $258.7 million in cash and now holds 5.5 percent of the company. The transaction was completed on Dec. 29, the filings said.

At the time of the original announcement, Vipshop stock soared nearly 50 percent to above $12 per ADS while the purchase price represented a 55-percent premium over the price of the stock as of Dec. 16, the day before the sides reached their agreement.

In addition to the stock transaction, Tencent also gains the right to appoint one board member to Vispshop under certain conditions. And both Tencent and JD.com have agreed to retain the shares for at least two years before transferring or selling their stake.

In addition, the agreement also calls for Vipshop to be tightly integrated into the two companies' websites, including JD.com's mobile application and its Weixin Discovery shopping entry, as well as Tencent's Weixin wallet portal. JD.com, often referred to as the Chinese Amazon, is the largest e-commerce company in China, and the largest Chinese retailer, by revenue. Tencent, with a market capitalization of more than $500 billion, is China's equivalent to Facebook and Paypal combined.

"Through the strategic cooperation contemplated by this Agreement, the Parties hope to improve on the competitiveness of Vipshop in the e-commerce space and the ability of Tencent's platforms to profit from e-commerce traffic, and to expand their respective user bases," according to the Tencent filing.

"The strength of Vipshop's flash sale and apparel businesses, as well as its outstanding management team, create clear and strong synergies with us," Richard Liu, Chairman and CEO of JD.com, said in its December press release. "This partnership will further extend the strong inroads that we have made with female shoppers, and will expand the breadth and reach of our fashion business. We continue to add the top-notch partners to complement JD.com's core strengths, ensuring that JD and our partners provide the best customer experience for every shopping need."

JD.com (Nasdaq: JD) closed today at $46.10 per ADS, up 1 percent. Tencent closed in Hong Kong at HKD 438.60 per share, an increase of 1.25 percent.


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