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JD.com to raise $1.5 billion in the largest chinese internet IPO

Staff writer |
JD.com, China's second-biggest electronic commerce company, filed to raise $1.5 billion in a U.S. initial public offering that would be the largest by a Chinese internet company.

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Formerly known as 360buy Jingdong Inc and backed by Saudi billionaire Prince Alwaleed bin Talal, JD.com is said to be trying to hold its IPO in the U.S. ahead of rival and market leader Alibaba Group Holding Ltd. China is on a course to overtake the US as the world's biggest online retail market this year with predicted sales of nearly $180 billion.

JD.com said it would top its 2013 sales target of 100 billion yuan ($16.5 billion). The Beijing-based company and other web-based retailers in China dwell in Alibaba's shadow, which has captured nearly 80 percent of the Chinese market. Bankers predict an Alibaba IPO could raise up to $15 billion and value the company at more than $100 billio.

JD.com tries to differentiate itself from Alibaba by operating its own network of couriers and warehouses, a factor it says ensures timely and efficient delivery. Alibaba depends on merchants and external courier firms for their logistics.

With 35.8 million active customer accounts, JD.com posted a profit for the first nine months of 2013 after a string of losses, according to the IPO filing. It had 35.8 million active customer accounts and processed 211.7 million orders in the first nine months of 2013. Revenue surged 70 percent to $8 billion in the period.

Founder and CEO Richard Liu owns a 46 percent interest in JD.com, according to the filing. Alwaleed's Kingdom Holding Co owns about 5 percent while Tiger Global Management LLC has 22 percent.

JD.com's IPO filing did not reveal how many American depositary shares it planned to sell, the expected share price or the exchange on which the shares would trade. It said the $1.5 billion figure is a placeholder used to calculate fees and may change. The company said it would use the offering proceeds to buy more land rights, build new warehouses, expand its distribution and make acquisitions.

The filing cited last week's ruling by a Securities and Exchange Commission administrative law judge that four Chinese units of the Big Four auditing firms should face a six-month suspension from auditing U.S.-traded companies as a risk factor.

Saying its independent registered public accounting firm is one of the four firms subject to the suspension, JD.com's filing said the company could be "adversely affected by the outcome of the proceedings, along with other US-listed companies audited by these accounting firms".

The firms receiving the bans have said they will appeal the decision. In his judgment, Administrative Law Judge Cameron Elliot said the firms broke US law when they refused to turn over certain client documents for inspection to aid in SEC investigations of possible fraud. The Chinese firms insisted their hands were tied by Chinese law which treats the audit documents as "state secrets".

China's securities subsequently accused the SEC of ignoring China's efforts and progress made on cross-border rules cooperation. Deloitte Touche Tohmatsu CPA Ltd, PricewaterhouseCoopers Zhong Tian CPAs Ltd, Ernst & Young Hua Ming LLP and KPMG Huazhen have 21 days to file a petition for review with the SEC before the January 22 ruling would become final.


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