Walmart sells its shares in JD.com and focuses on its business in China.

August 20, Reuters

As US retail companies focus on their businesses in China, Walmart is looking to raise up to 3.74 billion dollars by selling shares of JD.com (9618.HK), a Chinese e-commerce company.

Walmart is offering 44.5 million shares of US depositary shares at a price of $24.85 to $25.85 per share, with Morgan Stanley serving as the offering broker-dealer.

Walmart, the largest shareholder of JD.com, stated that JD.com has been a valuable partner for the past 8 years, and US retailers promise to maintain a continuous business relationship with China's huge e-commerce.

"With this decision, Walmart can focus on its strong business in China with Walmart China and Sam's Club, and allocate capital to other priorities," Walmart said.

JD.com's Hong Kong-listed shares fell more than 10% in early Wednesday trading. The US-listed shares fell 10% in off-market trading on Tuesday to $25.50 after Bloomberg first reported the stock sale plan.

JD.com declined to comment. Morgan Stanley did not immediately respond to Reuters' request for comment.

China's massive e-commerce companies reported better-than-expected second-quarter profits last week, but stock prices have dropped by about 70% from the peak in early 2021, trading largely unchanged from when Walmart became a major shareholder in 2016.

China's retail market has been hit by sustained worsening consumer sentiment stemming from a slowdown in the real estate market and concerns about employment and income.

Major e-commerce companies in China, including JD.com, rival Alibaba (9988.HK), and PDD Holdings (PDD.O), engage in fierce price competition to stimulate consumer purchasing desire, squeezing revenue growth and profit margins.

Walmart's recent stock sale was explained by Liu Xinliang, an internet industry analyst at the Beijing-based DCCI datacenter, as 'to focus on the Chinese market, especially on Sam's Club.' He stated, 'This means Walmart is optimizing its global business layout rather than lacking confidence in JD.com's development prospects.'

Walmart announced that its China business revenue for the second quarter reached $4.6 billion, a 17.7% increase from the same period last year.

According to data from LSEG, the US retailer holds 5.19% of JD.com's shares. The partnership between the two companies began in 2016, with Walmart acquiring 5% of JD.com's shares and selling its online grocery store Yihaodian in China in return.