JD Shuffles Boardroom, Alibaba Profit Soars
There’s a flurry of news out today on China’s 2 leading e-commerce firms, led by a new IPO filing and major boardroom adjustment at JD.com as the nation’s second largest player prepares to raise up to $1.5 billion through a New York listing. Meantime, industry leader Alibaba has reported impressive earnings for the fourth quarter of 2013, as it also heads towards a major New York listing as soon as later this year. JD’s boardroom change looks most interesting to me, as it’s a bit unusual to see such major movement in a company’s top ranks so close to an IPO. That leads me to wonder if this is the first in a series of moves leading to the eventual marginalization of JD founder and CEO Liu Qiangdong.
I’ll come back to the question of Liu’s future at JD shortly, but first let’s review the latest headlines for this fast-rising company that recently bolstered its position by pooling its e-commerce business with that of Internet titan Tencent (HKEx: 700). JD has just made a new public filing in the run-up to its IPO, though new information isn’t all that exciting.
The biggest news is that JD has chosen the Nasdaq for its listing. (Chinese article) The only other major news is its chosen ticker symbol, and no one will be surprised to learn that will be JD. The choice of Nasdaq is slightly surprising, since the New York Stock Exchange has recently emerged as the top choice for many of China’s tech firms listing in the US. But I wouldn’t interpret too much into the choice, since Nasdaq is also quite a capable company and was previously the preferred venue for Chinese firms before NYSE recently became more aggressive.
More interesting in the JD headlines is the news that Zhao Guoqing has resigned as JD’s co-chairman for personal reasons. (Chinese article) I’m unfamiliar with Zhao, but he does appear to be an ally of JD founder and CEO Liu. Media reports point out the pair were classmates at a European management school before Zhao joined JD in 2012. Zhao later became vice chairman in the middle of 2013, and assumed his co-chairman role at the end of the year.
Zhao’s departs as JD prepares to make its IPO, and also as Liu’s own future role at the company comes into focus. Liu built up JD into a major e-commerce player in fairly short time, but his loose lips and lack of experience led to frequent signs that he was clashing with his big investors. He disappeared about a year ago to attend a management class in New York, and has been far less visible at the company since his return late last year. All that leads me to speculate that Zhao’s departure could be part of a broader house-cleaning that could eventually see Liu pushed into a more nominal strategic role at JD while more seasoned managers are brought in to run the company.
Lastly let’s look quickly at Alibaba, whose quarterly results are regularly included in the financial reports from Yahoo (Nasdaq: YHOO), one of its major stakeholders. I won’t give too much ink to this part of my post, as the results are quite impressive as usual. Alibaba’s profit doubled to $1.35 billion for the quarter, while revenue rose at a slower but still healthy 66 percent to just over $3 billion. (English article)
That kind of growth is quite impressive for a company of Alibaba’s size, and reflects not only its status as a well-run company but also the huge potential of China’s e-commerce market. I do expect Alibaba will face some strong headwinds in the years ahead from JD and other players like Amazon (Nasdaq: AMZN) and Wal-mart’s (NYSE: WMT) Yihaodian. But that pressure is still at least a year or two away, and I have no doubt that Alibaba will attract lots of investor interest when it makes its highly anticipated IPO possibly later this year.
Bottom line: JD’s new boardroom adjustment hints at an ongoing marginalization of CEO Liu Qiangdong, while Alibaba’s latest strong quarterly results ensure it will attract big interest for its upcoming IPO.
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