The Rising Influence of Rising Affluence

[DewDiligence]

JD.com (JD) IPOs and trades up modestly in first day:

http://dealbook.nytimes.com/2014/05/21/jd-com-a-chinese-e-commerce-retailer-raises-nearly-1-8-billion-in-i-p-o

Shares in JD.com will begin trading on the Nasdaq on Thursday, under the symbol JD… The number of orders for the retailer’s stock was 15 times oversubscribed, according to a person briefed on the matter.

...JD.com, which began as a seller of electronics, now claims to be the biggest direct seller to Chinese consumers, with $20.7 billion worth of goods sold directly to customers last year. Much of the company’s appeal lies in the relatively unconquered Chinese e-commerce market. In its prospectus, JD.com noted that less than 50 percent of the country’s population was online. And online shopping is expected to grow about 27 percent each year, according to the iResearch Consulting Group.

Though many investors have directly compared JD.com to Alibaba, the two operate differently. JD.com maintains a significant amount of product inventory and owns much of its shipping and logistics network, a business model that many have likened to Amazon’s core business.

…JD.com has reported a loss in each of the last five years, even as its sales have ballooned. Last year, for instance, the company lost $8 million, despite racking up $11.5 billion in sales.

…analysts have raised concerns about parts of JD.com’s structure, among them the unusual power the company’s founder will have. Thanks to his ownership of a second, much more powerful class of stock, Mr. Liu will continue to exert an enormous amount of control, wielding an effective 84 percent of the retailer’s voting power.

The bottommost sentence above is a sufficient reason for me to avoid this stock. In midday trading today, JD is +10% from its IPO price of $19.