JD.com, one of China's leading online retailers, is embarking on a significant financial maneuver, aiming to raise $1.5 billion through a convertible bond sale. The move, revealed in the company's regulatory filings on Tuesday, highlights JD.com's strategic efforts to bolster its global operations and enhance its supply chain network.
The five-year convertible bond, with an option for investors to redeem after three years, was launched post the closing of Hong Kong's trading session and prior to the opening of the New York market. According to a term sheet seen by Reuters, the bond is being marketed with a semi-annual coupon ranging from zero to 0.25%. The conversion premium is set at 35% over JD.com's reference price of HK$132, which was the stock's closing price on Tuesday.
This $1.5 billion convertible bond issuance stands as the largest of its kind in Asia for 2024, according to Dealogic data, and is the second largest in the past 17 months following SK Hynix's $1.7 billion convertible bond deal in April of the previous year. Despite a decrease in convertible bond issuance in Asia year-to-date, down to $6.5 billion from $12.7 billion in the same period last year, JD.com's move underscores a robust commitment to financial agility and growth.
JD.com intends to leverage the raised capital to fuel its overseas expansion, fortify its supply chain capabilities, and potentially repurchase shares, as outlined in the term sheet. The final pricing for the deal is expected to be set before the commencement of New York trading. Additionally, the transaction includes a $225 million greenshoe option, providing an opportunity for additional capital raising.
The company's shares have shown resilience, with JD.com's Hong Kong-listed stock rising by 17.4% in 2024, and its New York-listed shares climbing 20.4%, according to LSEG data. However, following the announcement of the convertible bond, the firm's stock experienced a 3.5% drop, reflecting market volatility and investor caution.
The convertible senior notes, due in 2029, will serve as JD.com's senior unsecured obligations, representing high-priority debt without specific collateral backing. Investors are granted a 30-day period to purchase an additional $225 million in notes from the offering date, enhancing the flexibility and attractiveness of the investment.
The proceeds from this issuance are earmarked not only for share buybacks and global business expansion but also for enhancing JD.com's supply chain efficiency and covering operational costs. This aligns with the company's broader strategic initiatives, including a recently approved share repurchase program. This program authorizes JD.com to repurchase up to $3 billion worth of shares over the next three years, extending through March 2027.
JD.com's latest quarterly results reflect its financial health and operational momentum. The company reported a 7% increase in revenue for Q1 2024 compared to the same period last year, with income from operations reaching $1.1 billion, marking a 20% year-over-year increase. These figures underscore JD.com's robust performance amid a challenging economic landscape.
