China

Tencent and JD.com to Invest Combined US$ 863 Mln in Vipshop Holdings

Summary:

  • Tencent (0700.HK) and JD.com (JD.NASDAQ) have announced they will invest a combined US$ 863 million in China’s e-commerce platform Vipshop Holdings (VIPS.NYSE), as reported by jrj.com.
  • The share price of Vipshop rose more than 40% on December 18.

Why It Matters:

  • According to the deal, Tencent will invest US$ 604 million and JD.com will invest US$ 259 million at a price of US$ 13.08 per share. Taking into account previous investments, Tencent will hold a 7% stake in Vipshop and JD.com will own a 5.5% stake.
  • Vipshop has been encountering huge difficulties with business development in recent years. Alibaba (BABA.NYSE) and JD.com combined have a 83% market share of the Business to Consumer (B2C) market while Vipshop lacks a strong internet flow which the company needs to further boost its performance. The strategic partnership between Tencent and JD.com will resolve two issues simultaneously.
  • On the other hand, Vipshop’s dominant market share in women’s clothing and the niche cosmetics market provides JD.com and Tencent with great leverage for competing with the market leader, Alibaba.