Jingdong Trading Company, a Chinese e-commerce site, is planning a $US2 billion U.S. IPO in the second half of 2014, Bloomberg reports.
If this goes down, it will be the biggest IPO of a Chinese company in the United States since China Life Insurance raised $US3.3 billion going public in 2003.
Now a few things about the company — Jingdong’s e-commerce site, 360Buy.com, is right behind Alibaba’s Taobao in terms of e-commerce market share.
The company wants to go public soon, before its larger rival. Alibaba has yet to hire bankers, but Bloomberg reports that Jingdong is already working with UBS and Bank of America.
And according to Bank of America, that’s probably a good idea. The bank recently published a report called “eCommerce vs. retail: A power shift to consumer sovereignty,“ it is, in part, a break down of the problems in the e-commerce space.
One of the biggest problems BofA discusses is over-saturation. There are so many companies competing in the space that they are constantly undercutting each other on prices.
“Today’s China eCommerce is reminiscent of the US tech bubble in the late 1990s,” says BofA. “Boosted by PE/VC money, many eCommerce players are willing to sacrifice short-term profitability to gain market share. They may offer such compelling pricing and free shipping that much bigger overseas peers may not match.”
So it’s war, and Jingdong’s IPO is a way for the company to get a massive cash injection that could give it an edge over its peers.
Last February, Saudi Arabian Prince Alwaleed bin Talal’s Kingdom Holdings put $US400 million into Jingdong.
Alisher Usmanov, the richest man in Russia and an early investor in Twitter, is also invested in Jingdong.