Online retailer plans to raise as much as $5b in largest Internet float

HONG KONG - The Chinese online retailer Jingdong Mall Inc is set to kick off an IPO process next week that could be the most daring bet yet on US investors' appetite for Chinese stocks.

The company, which is also known by the name of 360buy.com, plans to raise $4 billion to $5 billion in an IPO tentatively scheduled for the first half of 2012, according to IFR, a Thomson Reuters publication.

An IPO of that size would surpass Google Inc's $1.9 billion IPO in 2004 as the largest Internet float in the United States, according to Thomson Reuters data.

Jingdong is scheduled to hold a "beauty parade" next week in Beijing to pick underwriters for the IPO, IFR said on Sept 7, citing sources familiar with the matter.

One of the sources said the IPO could exceed $5 billion, depending on its final timing.

The ramp-up to the IPO comes as the US IPO market has been struggling amid volatility triggered by Europe's debt crisis and a weak domestic recovery. A number of deals were withdrawn last month.

It also comes as some US-listed Chinese companies - mainly those that listed on US exchanges through reverse mergers - have been tainted by allegations of fraudulent accounting.

"Right now, US investors are very cautious about Chinese IPOs. The fact that some of those IPOs like Longtop ... basically have defaulted in the last few months obviously taints the waters for all of the other Chinese IPOs," said Josef Schuster, founder of Chicago-based IPO research and investment firm IPOX Schuster.

China's e-commerce market is growing along with the country's middle class, making it an attractive business opportunity, as the market is highly fragmented and competitive. Jingdong competes not only with Taobao.com but also with E-Commerce China Dangdang Inc.

Established in 2004, Jingdong is China's second-largest online retailer behind Taobao, according to the latest research from Analysys International.

Some analysts are doubtful about the ability of Chinese e-commerce companies to make a profit in the near term because of the huge market fragmentation.

Jingdong has about 15 million registered users. It is not currently profitable, but founder and CEO Liu Qiangdong has said the company is expected to become profitable in the second half of 2012.

Jingdong's revenue is expected to reach 28 billion yuan ($4.4 billion) by the end of 2011, up from 10 billion yuan at the end of 2010.

Jingdong raised $1.5 billion in a third round of funding in April, which valued the company at $10 billion, IFR said. Russia's Digital Sky Technologies and Tiger Fund are among the investors in the company.

Jingdong could not be reached for an immediate comment.

Before the accounting frauds, US-listed Chinese Internet stocks were a big hit among investors.

The Chinese social-networking company Renren Inc traded at nearly 80 times annualized sales in 2010 when it went public in May, with other Internet companies such as Jiayuan.com International Ltd and NetQin Mobile Inc also trading at high valuations.

Reuters