As the anticipation on Wall Street builds for Chinese Internet giant Alibaba’s upcoming public offering, a smaller competitor is benefiting from the hype with its own successful IPO.
JD.com, an online retailer in China similar to Amazon, raised an impressive $1.78 billion Wednesday night when its IPO priced at $19 per share, above the expected range of $16 to $18. The company’s stock leapt 16 percent to $22 in early morning trading, pushing the company’s market capitalization above $29 billion.
Like Alibaba, JD.com has benefited from the explosive growth of China’s Internet population in recent years. The company’s revenue, generated almost entirely from the direct sale of products, has ballooned from $3.4 billion in 2011 to $11.5 billion in 2013. JD.com has 47 million active customers who completed 323 million orders in 2013.
However, because the site operates like Amazon, it faces the same costs related to buying products to sell and managing fulfillment centers to ship them out quickly. The company posted an $8 million net loss in 2013 and larger losses in the two years prior. Alibaba, which manages a merchant marketplace instead of selling directly to consumers, does not have to deal with such costs and posts profits that are unparalleled in U.S. online retail.
Other Chinese tech companies have also had solid Wall Street debuts. The Twitter-like social network Weibo arrived on the Nasdaq at the low-end of its IPO range and is currently trading about 8 percent above its initial price of $17. Online retailer Jumei, which specializes in beauty products, saw its stock jump 24 percent in its first day on the market earlier this month. Combined, the successful offerings bode well for Alibaba mega-IPO, which could be the largest in U.S. history.