Walmart’s $3.6 billion sale of JD.com shares fuels tech crisis in China

SHARES IN FREE FALL:
JD.com’s Hong Kong-listed shares fell as much as 12 percent yesterday, triggering a broader sell-off in Chinese e-commerce and technology stocks.

Walmart Inc. has raised about $3.6 billion by selling its stake in Chinese e-commerce company JD.com Inc. (京東), ending an eight-year partnership that appears to be yielding increasingly diminishing returns amid a difficult environment for Chinese technology giants.

The U.S. retailer sold 144.5 million shares for $24.95 a share, people familiar with the matter said. That was an 11 percent discount to Tuesday’s U.S. closing price, according to Bloomberg calculations.

JD.com’s Hong Kong-listed shares fell as much as 12 percent yesterday, triggering a broader sell-off in Chinese e-commerce and technology stocks. JD.com also bought back $390 million worth of its own shares yesterday.

Photo: EPA-EFE

Walmart is refining its strategy in the world’s second-largest economy, where its longtime e-commerce partner is struggling, as are its traditional rivals Alibaba Group Holding Ltd (阿里巴巴) and Temu owner PDD Holdings Inc (拼多多).

The deal also comes at a time when the real estate crisis, market volatility and uncertain employment prospects are affecting Chinese consumption.

“I expect Walmart will be disappointed with the horse they backed,” said Mark Tanner, managing director of marketing agency China Skinny. “It doesn’t feel like the original ambitions at the time of the acquisition have worked out as planned.”

The sale will allow Walmart to “better focus on its strong development efforts in the country,” which includes Sam’s Club and its hypermarket business, and “provide funds for other priorities,” the company said in a statement.

The retailer announced that it would continue to work with JD.com and described the Chinese e-commerce company as a “valuable partner”.

JD.com is confident that the cooperation between the two companies will continue in the future, it said in a separate statement.

Walmart’s Sam’s Club franchise was a bright spot for the company. It was the only one of the top five hypermarket chains to report sales growth last year, according to the China Chain Store & Franchise Association.

In China, the division offers premium goods under a membership model that is now being copied by competitors, while the group’s other hypermarkets are struggling just as much as their competitors.

According to a report by Citigroup Inc, Walmart will likely use the capital from the sale to expand its own stores.

JD.com’s second-quarter results beat expectations, even though revenue rose only 1.2 percent, continuing a string of single-digit quarters since 2022.