Chinese e-commerce giant JD.com has reportedly applied for a secondary listing in Hong Kong. If the company pushes ahead with its planned share sale, it could become one of the largest listings in the city so far this year.
According to reports citing sources with knowledge of the matter, JD.com had already made a confidential filing with the Hong Kong Stock Exchange for its secondary listing. The company reportedly is aiming to raise as much as $2 billion through the share sale.
However, the exact amount the company will be able to raise will be dependent on the performance of its already listed shares in the US, which will become the basis of its share prices in Hong Kong. Pricing its shares in China close to its US trading levels will limit the chances for arbitrage between the two exchanges. As of Tuesday, JD.com's shares in the US closed at $45.58 per share, up by 24 percent since the start of the year.
The move to also list its shares at home after having listed abroad is similar to the strategy implemented by its closes rival, Alibaba Group Holding. In November last year, Alibaba managed to raise $12.9 billion through its secondary listing in Hong Kong.
It is currently not yet determined how many shares JD.com will be made available in its planned secondary listing. The company likely will not want to dilute its existing shares in the US, which currently has a market capitalization of around $64 billion.
At a rough estimate of around $2 billion, JD.com's listing in Hong Kong will become the world's third-largest IPO this year, right behind Beijing-Shanghai High-Speed Railway's US$4.4 billion debut and Central Retail Corporation's US$2.5 billion IPO. The listing will be a big boost to Hong Kong's reputation as the world's leading financial hub and a massive boost to China's economic activity after having suffered months of economic decline due to the coronavirus pandemic.
Just like its rival Alibaba, JD.com will likely want to take advantage of the new supportive rules implemented by Hong Kong, which makes it easier for local companies to have dual classes of shares. Hong Kong has continually been trying to change its rules to convince Chinese firms to list their shares at home as opposed to listing them on exchanges outside China. Hong Kong had been forced to implement its new rules after it lost out to New York to host Alibaba's $25 billion IPO.
