What happened
Shares of JD.com (NASDAQ: JD) were on the move today, gaining after the company announced a proposed spinoff of its JD Logistics division through a separate listing in Hong Kong.
As of 11:26 a.m. EST on Tuesday, the stock was up 5.1% on the news.
A JD delivery robot. Image source: JD.com.
So what
In a brief regulatory filing, JD announced a proposed spinoff and separate listing of JD Logistics on the Hong Kong Stock Exchange.
The move plays into one of the key components of the JD.com bull thesis, which is that the e-commerce giant is developing a number of powerful subsidiary businesses including JD Health, JD Digits, and JD Property.
But JD Logistics is likely the biggest of the bunch. It operates 800 warehouses in China, giving it more warehouse space than Amazon. And like Amazon, JD built its logistics operations to serve its own delivery needs, but it's also allowed it to build a fast-growing third-party logistics business.
In November, Bloomberg reported that JD was considering a $40 billion valuation for the logistics unit in a potential spinoff, with plans to raise $5 billion from it. With JD.com's market cap now at $164 billion, the IPO of the logistics arm would unlock a considerable amount of value. JD.com would retain majority ownership of JD Logistics after the IPO.
Now what
The spinoff follows a smashing debut for JD Health, which had its IPO on the Hong Kong Exchange in December. Shares of the telehealth company jumped 56% on their opening day, raising $3.4 billion for JD.com.
The success of that IPO and the enthusiasm for JD Logistics' upcoming listing show that the business has expanded considerably beyond its roots in e-commerce, following a path that has worked for Chinese tech giants like Alibaba Group Holding and Tencent Holdings. With its stock now up more than 300% over the last year, that strategy clearly seems to be working.
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