JD.com Announces Proposed Offering of US$1.5 Billion Convertible Senior Notes
JD.com announced a proposed offering of US$1.5 billion convertible senior notes due 2029, with an option for purchasers to buy an additional US$225 million. The proceeds will be used for repurchasing shares, expanding overseas business, improving the supply chain, and working capital needs. The notes will be senior, unsecured obligations, convertible into cash, ADSs, or a combination. Purchasers can convert at any time before maturity. JD.com plans a concurrent repurchase of its Class A shares/ADSs alongside the pricing of the notes. Future repurchases are also planned.
- Proposed offering of US$1.5 billion in convertible senior notes indicates strong liquidity plans.
- Net proceeds will be used for strategic purposes: share repurchase, overseas expansion, supply chain improvement, and working capital.
- Option to buy an additional US$225 million in notes shows confidence in market demand.
- Concurrent repurchase and share buyback program could mitigate dilution risks for existing shareholders.
- Flexibility in conversion terms (cash, ADSs, or combination) offers investors multiple options.
- Convertible senior notes can lead to future dilution of shares.
- Repurchase activities may affect the market price unpredictably.
- Interest rates, initial conversion rates, and other terms are yet to be determined, creating uncertainty.
- Potential impact of convertible arbitrage strategies by purchasers on market prices is uncertain.
Insights
JD.com’s proposed offering of
Convertible senior notes are particularly interesting for investors because they offer a potential upside through conversion into shares while still providing fixed income returns. The conversion feature allows investors to benefit from any future appreciation in JD.com’s stock price. However, this also means potential dilution for existing shareholders if the notes are converted into equity.
The interest rate and conversion terms, yet to be determined, will be important in assessing the attractiveness of these notes. A lower interest rate would be more favorable for JD.com, reducing its cost of debt. The concurrent and ongoing repurchase of shares using the note proceeds aims to counteract any dilution, which might help maintain or increase the stock price, benefiting current shareholders.
One key issue to monitor is the use of the repurchase strategy. While it can support share prices in the short term, it also suggests that the company might not have better investment opportunities for this cash. Investors need to balance the potential benefits of the company's growth initiatives against the immediate financial engineering tactics.
From a market perspective, JD.com’s decision to offer convertible senior notes reflects a sophisticated financing strategy often adopted by tech giants to leverage current low-interest rate environments while keeping options open for future equity conversion. This approach can attract a different investor class interested in both fixed income and equity upside, potentially broadening JD.com's investor base.
The company’s intention to use the proceeds for overseas expansion and supply chain improvements indicates a commitment to scaling its global operations and enhancing logistical capabilities. These are critical growth areas, especially as e-commerce competition intensifies globally. Effective deployment of these funds could translate into significant long-term market share gains.
It’s worth noting that the arbitrage strategies employed by potential note purchasers can affect market dynamics. Investors should be aware that such strategies can lead to increased volatility in the stock price as these arbitrageurs hedge their positions. This could be a double-edged sword, providing liquidity on one hand but also contributing to price swings.
Lastly, the market’s interpretation of JD.com’s share repurchase program could influence investor sentiment. While repurchases often signal a company’s confidence in its stock, consistent buybacks might also raise questions about the company's growth opportunities and strategic direction. This is something investors should consider when assessing the overall impact of the Notes Offering.
BEIJING, May 21, 2024 (GLOBE NEWSWIRE) -- JD.com, Inc. (“JD” or the “Company”) (NASDAQ: JD and HKEX: 9618 (HKD counter) and 89618 (RMB counter)), a leading supply chain-based technology and service provider, today announced a proposed offering (the “Notes Offering”) of convertible senior notes in an aggregate principal amount of US
The Company plans to use the net proceeds from the Notes Offering (a) for the Concurrent Repurchase (as described below) and to repurchase on the open market, after the pricing of the Notes and from time to time, additional Class A ordinary shares and/or American depositary shares (“ADSs”), each representing two Class A ordinary shares, of the Company pursuant to its share repurchase program(s), (b) to expand its overseas business, (c) to further improve its supply chain network and (d) for working capital needs.
Expected Terms of the Notes
When issued, the Notes will be senior, unsecured obligations of the Company. The Notes will mature on June 1, 2029, unless earlier redeemed, repurchased or converted in accordance with their terms prior to such date.
Holders of the Notes may convert their Notes at their option at any time prior to the close of business on the third scheduled trading day immediately preceding the maturity date. Upon conversion, the Company will pay or deliver, as the case may be, cash, ADSs, or a combination of cash and ADSs, at the Company’s election. Holders may elect to receive Class A ordinary shares in lieu of any ADSs deliverable upon conversion, which will be fungible with the Company’s Class A ordinary shares listed on the Stock Exchange of Hong Kong Limited (“Hong Kong Stock Exchange”) after the resale restriction termination date (as set forth in the terms of the Notes). The interest rate, initial conversion rate and other terms of the Notes will be determined at the time of pricing of the Notes.
Holders of the Notes may require the Company to repurchase all or part of their Notes for cash on June 1, 2027 or in the event of certain fundamental changes, at a repurchase price equal to
Concurrent and Future Repurchases
Concurrently with the pricing of the Notes, the Company plans to repurchase a number of its Class A ordinary shares and/or ADSs to be determined at the time of pricing of the Notes from certain purchasers of the Notes in off-market privately negotiated transactions effected through one of the initial purchasers or its affiliates, as the Company’s agent (such transactions, the “Concurrent Repurchase”). The Concurrent Repurchase is expected to facilitate the initial hedging by purchasers of the Notes who desire to hedge their investments in the Notes, as the Company intends to repurchase the entire initial delta of the transaction. This will allow such purchasers of the Notes to establish short positions that generally correspond to commercially reasonable initial hedges of their investments in the Notes. The Concurrent Repurchase will be made pursuant to the Company’s share repurchase program announced in March 2024. The Company expects the purchase price in the Concurrent Repurchase to be (i) in the case of ADSs, the closing price of the Class A ordinary shares on the Hong Kong Stock Exchange on May 21, 2024 as adjusted for the ADS-to-share ratio at a pre-determined exchange rate for U.S. dollars and (ii) in the case of Class A ordinary shares, the closing price of the Class A ordinary shares on the Hong Kong Stock Exchange on May 21, 2024.
In addition to the Concurrent Repurchase, the Company may also repurchase additional Class A ordinary shares and/or ADSs on the open market after the pricing of the Notes and from time to time. The Concurrent Repurchase and future repurchases pursuant to the Company’s share repurchase program(s) will be funded by the net proceeds of the Notes Offering and other cash on hand, and, in the aggregate, are generally expected to offset potential dilution to the holders of the Company’s ordinary shares (including in the form of ADSs) upon conversion of the Notes.
Other Matters
The repurchase activities by the Company, whether in the Concurrent Repurchase or otherwise pursuant to its share repurchase program(s), could increase, or reduce the magnitude of any decrease in, the market price of the ADSs and/or Class A ordinary shares and/or the trading price of the Notes.
The Company expects that potential purchasers of the Notes may employ a convertible arbitrage strategy to hedge their exposure in connection with the Notes. Any such activities by potential purchasers of the Notes following the pricing of the Notes and prior to the maturity date could affect the market price of the ADSs and/or Class A ordinary shares and/or the trading price of the Notes. The effect, if any, of the activities described in this paragraph, including the direction or magnitude, on the market price of the ADSs and/or Class A ordinary shares and/or the trading price of the Notes will depend on a variety of factors, including market conditions, and cannot be ascertained at this time.
The Notes, the ADSs deliverable upon conversion of the Notes, if any, and the Class A ordinary shares represented thereby or deliverable upon conversion of Notes in lieu thereof have not been and will not be registered under the Securities Act of 1933, as amended (the “Securities Act”) or securities laws of any other places. They may not be offered or sold within the United States or to U.S. persons, except to persons reasonably believed to be qualified institutional buyers in reliance on the exemption from registration provided by Rule 144A under the Securities Act and to certain non-U.S. persons in offshore transactions in reliance on Regulation S under the Securities Act.
This press release shall not constitute an offer to sell or a solicitation of an offer to purchase any securities, nor shall there be a sale of the securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful.
This press release contains information about the pending Notes Offering, and there can be no assurance that the Notes Offering will be completed.
About JD.com, Inc.
JD.com is a leading supply chain-based technology and service provider. The company’s cutting-edge retail infrastructure seeks to enable consumers to buy whatever they want, whenever and wherever they want it. The company has opened its technology and infrastructure to partners, brands and other sectors, as part of its Retail as a Service offering to help drive productivity and innovation across a range of industries.
Safe Harbor Statement
This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “confident” and similar statements. JD.com may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the “SEC”), in announcements made on the website of the Hong Kong Stock Exchange, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about JD.com’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: JD.com’s growth strategies; its future business development, results of operations and financial condition; its ability to attract and retain new customers and to increase revenues generated from repeat customers; its expectations regarding demand for and market acceptance of its products and services; trends and competition in China’s e-commerce market; changes in its revenues and certain cost or expense items; the expected growth of the Chinese e-commerce market; laws, regulations and governmental policies relating to the industries in which JD.com or its business partners operate; potential changes in laws, regulations and governmental policies or changes in the interpretation and implementation of laws, regulations and governmental policies that could adversely affect the industries in which JD.com or its business partners operate, including, among others, initiatives to enhance supervision of companies listed on an overseas exchange and tighten scrutiny over data privacy and data security; risks associated with JD.com’s acquisitions, investments and alliances, including fluctuation in the market value of JD.com’s investment portfolio; natural disasters and geopolitical events; change in tax rates and financial risks; intensity of competition; and general market and economic conditions in China and globally. Further information regarding these and other risks is included in JD.com’s filings with the SEC and the announcements on the website of the Hong Kong Stock Exchange. All information provided herein is as of the date of this announcement, and JD.com undertakes no obligation to update any forward-looking statement, except as required under applicable law.
Contacts:
Investor Relations
Sean Zhang
+86 (10) 8912-6804
IR@JD.com
Media Relations
+86 (10) 8911-6155
Press@JD.com
FAQ
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