Strategic investors of JD

Chinese e-commerce company jd.com has invited three domestic Internet companies Tencent Holdings, Baidu Inc and Qihoo 360 Technology Co to be cornerstone investors, and Tencent might accept the offer, media reports said Tuesday.

JD.com Inc filed to launch an IPO in the US on January 30 to raise up to $1.5 billion. Afterward, JD officially invited Tencent, Baidu and Qihoo 360 to be its cornerstone investors and negotiations are still ongoing, financial news portal caijing.com reported Tuesday.

Tencent might invest in JD and merge its e-commerce businesses including yixun.com and paipai.com with JD in exchange for more shares, according to the report.

In preparation for this, Tencent has started cutting jobs in its e-commerce businesses, the report said.

Although Tencent and JD declined to comment when contacted by the Global Times Tuesday, Lu Zhenwang, an analyst with Shanghai Wanqing Commerce Consulting, told the Global Times Tuesday that Tencent's e-commerce employees have begun job hunting.

Investment in JD will help Tencent further expand its advantage in the mobile Internet market, Lu said, noting that joining up with a leading e-commerce platform such as JD will boost the users of the online payment service provided by Tencent's WeChat.

WeChat is a popular mobile messaging application developed by Tencent and had reportedly attracted more than 600 million users as of the end of last year.

Yixun.com, which was acquired by Tencent in 2012, earned 10 billion yuan ($1.63 billion) revenue in 2013, but it is still hard for it to compete with JD, Lu said, noting it would be more convenient for Tencent to cooperate with JD than running an e-commerce business by itself.

Founded in early 2004, JD is a leading e-commerce platform especially for computer, communication and consumer electronics.

JD said it would reach its annual sales target of 100 billion yuan in 2013, Reuters reported on January 30.

By working with JD, Tencent may be able to challenge Alibaba Group, analysts said.

Cooperating with JD will provide a great advantage to Tencent in competition with Alibaba Group in the mobile Internet market, according to Lu.

Tencent has almost covered each online sector of local service with investments in group-buying website gaopeng.com, taxi-hailing application Didi Dache, and store and restaurant review website dianping.com, Lu said.

JD can also benefit from the cooperation with Tencent, Lu said, noting WeChat can bring a large number of users to JD through the online payment tool.

Receiving investment from Tencent can also boost investors' confidence in JD for its IPO, Lu said.

However, there are still some doubts over the cooperation plan, Feng Lin, an analyst at China E-Commerce Research Center, told the Global Times Tuesday.

JD has a high estimated value so it would be expensive for Tencent to be a controlling shareholder, Feng said.

The estimated value of JD ranges from $30 billion to $40 billion, news portal qq.com reported on February 20. 

But if Tencent is not seeking to be a controlling shareholder, to merge yixun.com with JD will risk losing control of yixun.com, which has developed quite well after being acquired by Tencent, he said.

As for Baidu and Qihoo 360, which were also mentioned in caijing.com's report, Lu said it is less likely for them to invest in JD.

Baidu still mainly focuses on search service and related businesses such as video websites and basically has no strong competitors in China now, Lu said, predicting Baidu has little interest in e-commerce.

The main business of Qihoo 360 are security software and search service, both of which have no strong link with e-commerce.

Baidu and Qihoo 360 refused to comment when contacted by the Global Times  on Tuesday.

JD.com's profit & losses (million yuan)

2009               -103

2010               -412

2011             -1,284

2012             -1,729

Jan-Sep 2013     60

Source: JD.com's prospectus filed with US SEC