April 13, 2021

JD.com’s Liu Qiangdong Exceeds Expectations with IPO for Health Care Arm JD Health

JD Health, the health-care division of Chinese e-commerce giant JD.com, exceeded analyst expectations with an initial public offering that generated HK$26.46 billion (US$3.4 billion) in December 2020.

For JD.com chairman and CEO Liu Qiangdong, the wildly successful IPO was yet another successful venture for the fast-growing e-commerce company.

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Exceeding IPO Expectations

JD Health’s IPO blew past all projections. The company issued 381.9 million shares, priced at HK$70.58. When Hong Kong markets opened, the price surged to HK$94.5, reaching a high that day of HK$123.3 before closing at HK$110.

The health care subsidiary of JD.com was launched in 2017, three years after the company began offering health services. It began independent operations in 2019.

JD Health (6618 HK on the HKEX) offers products and services across the pharmaceutical supply chain. It is already China’s largest pharmaceutical retailer offering business-to-business, business-to-consumer and online-to-offline services. Its core services include:

JD Pharmacy, a B2C e-commerce pharmacy platform offering a range of online pharmaceutical and health care products and equipment in China.JD Medicine Procurement, a B2B online pharmaceutical trading platform with more than 170,000 pharma retailersA drug delivery service that partners with 200,000 offline pharmacies in 200 cities and promises 30-minute delivery16 specialized online medical centers, opened in response to0 the COVID-19 pandemic, including operations specializing in respiratory care, diabetes, hepatology, oral care, spine care, foot and ankle issues, ENT (ear, nose and throat) care, general medicine and traditional Chinese medicineA “family doctor” telemedicine programConsumer health care services including appointment scheduling for check-ups, genetic testing, vaccinations and medical cosmetology

JD Health estimates it will have 100 million users by the end of 2021. Strict government controls mean no company will have a monopoly on the online health care market in China, which could shield the company from rigid antitrust rules set to take effect that are focused on providing more regulatory oversight of tech companies.

China also has an aging population, with Beijing estimating that the number of people over age 60 will increase to 487 million by 2050, compared to 254 million in 2019.

Plans for Growth and Community

JD Health said it expects to use 40 percent of the IPO’s net proceeds to expand the business over the next 3-5 years. Thirty percent will go towards research and development over the next 2-3 years. The remaining proceeds will be used for acquisitions, investments and general business purposes.

For the six months ending June 30, 2020, the company brought in 8.78 billion yuan (US$1.34 billion) in revenue, compared to 4.99 billion yuan the previous year.

The success comes at a perilous time for Chinese companies and IPOs. There is a continued threat of U.S. legislation to delist Chinese companies if regulators cannot agree on a compromise regarding audit oversight. In addition, Jack Ma, another e-commerce giant, saw China come down on its planned IPO for Ant Group, delaying it likely until 2022.

JD.com has been undeterred. In June 20202, its grocery delivery arm, DADA Nexus, raised US$320 million in a NASDAQ IPO. Its fintech arm, JD Digits, filed for an IPO on the Shanghai NASDAQ’s STAR Market. JD Logistics, which offers supply-chain management services, also is considering an IPO which some analysts project could raise between US$8 billion and US$10 billion.

During the COVID-19 crisis, JD Health has responded in other ways, too. In 2020, the company launched several services to help support the country, including:

Free online medical consultationsPsychological care hotlinesA charitable online platform to ensure patients with chronic diseases have access to medicationA medicine subsidy project for poor householdsA partnership with a charity to explore the use of telemedicine and artificial intelligence to treat poor patients with pneumoconiosis

Leadership Transforms JD Health

For the company’s chairman and CEO, the JD Health IPO is just the latest business accomplishments. The son of coal-shipping parents, Liu Qiangdong has taken what was a small online company to new heights, including the largest IPO on NASDAQ when it went public in 2014.

After working at Japan Life, a larger herbal supplement company, he started his own company selling magneto-optical products. It was during an earlier health crisis, the SARS epidemic, that he saw the shift to shopping from home and eliminated physical store locations. The business evolved to one selling exclusively online and was Jingdong, eventually becoming JD.com.

Today, with a focus on offering a wide array of products and an emphasis on customer service, JD.com has more than 400 million active users.

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