HONG KONG -- JD Logistics is set to raise $3.16 billion from its Hong Kong IPO after pricing its shares toward the lower end of their marketed range due to investor concerns about the sector.
Despite the uncertain sentiment, subscriptions for its initial public offering have been brisk, with retail investors placing orders for more than 200 times their share allocation, according to a person familiar with the transaction. The offering, which opened on May 17, closes on Friday.
"While the demand was strong, the company was conscious of investor concerns around the sector and decided to leave enough for investors," the person said.
The IPO will be priced at HK$40.36 per share, according to three people familiar with the transaction. During marketing, JD Logistics gave an indicative range of HK$39.36 to HK$43.36 a share.
The logistics unit of Chinese e-commerce platform JD.com earlier drew SoftBank Vision Fund, Singapore government investment fund Temasek and five others as cornerstone investors. The company may sell a further 91 million shares via an overallotment option.
JD Logistics is scheduled to make its debut on the Hong Kong Stock Exchange on May 28. It will be the second-largest new listing in Hong Kong this year, behind only short video app operator Kuaishou Technology's $6.2 billion float in February.
The indicative pricing gives JD Logistics, which offers supply chain services from warehousing to distribution, a valuation of $31.6 billion, compared with pre-IPO expectations of around $40 billion.
JD Logistics' listing will make it the third group company with shares traded in Hong Kong. JD.com itself raised $4.5 billion last June while acquiring a secondary listing in Hong Kong to add to its primary one in New York. JD Health raised $3.9 billion in a December IPO.
Recent Hong Kong share offerings have struggled. Eleven of the 16 companies that have listed on the city's exchange since March 1 are trading below the issue price, including those of SF Real Estate Investment Trust. Shares of the spinoff of SF Holdings, China's biggest delivery company, have fallen about 10% since debuting on May 17.
Companies have raised $20 billion via new listings in Hong Kong in the first four months of the year, compared with $2.33 billion over the same period last year.
A surprise first-quarter loss of 988.99 million yuan ($153.62 million) for SF Holdings amid a fierce domestic price war has shaken sentiment toward logistics operators. The company's shares have fallen 17% since the end of March.
"I firmly believe this is the darkness before dawn," said Lai Meisong, founding chairman and chief executive of ZTO Express, another major courier service, during a call with analysts on Thursday. "Things will definitely brighten up for the ones which offer efficiency, scale and quality of service."
ZTO reported a 42.4% rise in quarterly net profit from a year before to 533.62 million yuan, as revenue rose 65.3% to 6.47 billion yuan and parcel volumes rose 88.5% to 4.48 billion packages.
JD Logistics also expects a significantly higher net loss in 2021 due to accounting changes, higher expenses and reduced gross margins, it said in its prospectus. The company's net loss widened to 4 billion yuan in 2020 from 2.2 billion yuan a year earlier, according to its latest filing with the Hong Kong exchange.
The company originally started off in 2007 as the in-house logistics unit of JD.com. According to JD Logistics' IPO prospectus, the share of its revenues coming from its parent fell from 70.1% to 53.8% between 2018 and 2020, though the volume of such transactions continued to grow, reaching 39.4 billion yuan last year.
Additional reporting by Kenji Kawase