JD’s Fintech Arm Withdraws Shanghai IPO

JD Technology, the fintech unit of Chinese e-commerce giant JD.com Inc., withdrew its application for an initial public offering (IPO) on Shanghai’s Nasdaq-style STAR Market, the exchange said Friday in a statement.

The company didn’t disclose the reason for the withdrawal, but the market was not surprised amid China’s wide-ranging crackdown on the country’s online finance industry, which in November led to the shelving of Ant Group Co.’s massive stock offering.

JD Technology and the Shanghai Stock Exchange declined to comment.

JD Technology, formerly called JD Digits, filed its IPO application in September, aiming to raise about 20.4 billion yuan ($3 billion). It submitted the first round of inquiry replies to the exchange in October. The company was targeting a valuation of as much as 200 billion yuan.

When rival Ant Group suspended its potentially record-breaking IPO after Beijing introduced new regulations on consumer lending, it was widely expected that JD Technology’s pending IPO would also be affected.

The IPO withdrawal came one day after JD.com sold its cloud and artificial intelligence businesses valued at a combined 15.7 billion yuan to JD Technology. The move is expected to dilute the role of the financial business in JD Technology’s bottom line, which may help it sidestep some tougher new rules in the future.

As JD Technology’s business has shifted from consumer finance to digital technology, the original IPO materials are out of line with its current business model, and it will need to refile the application if it wants to continue the IPO, an investment banker said.

According to the previous JD Technology prospectus, before the recent transaction more than 40% of JD Technology’s revenue came from online microlending. In the first half of this year, JD Technology’s online consumer loan product JD Baitiao and online cash loan product JD Jintiao together contributed 43% of the company’s revenue, up from 38% in 2019 and 35% in 2018.

JD.com hasn’t disclosed revenue from its cloud and artificial intelligence businesses. In the first quarter of 2021, Alibaba Group Holding Ltd., Tencent Holdings Ltd., Huawei Technologies Co. Ltd., China Telecom Corp. and Amazon.com Inc.’s AWS together accounted for 77.5% of China’s cloud market, IDC data shows.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com).

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