Tencent lead $863 million investment into Vipshop
Tencent, the Chinese giant behind services such as leading messaging service, WeChat, has today announced its intention to acquire a 7% stake in Vipshop whilst Tencent long-time partner, JD.Com will invest $259 million into the company for a 5,5% stake.
Best known as an online discount retailer for brands, Vipshop is primarily focused on the fashion space. Having held its IPO in New York in 2012, the fashion site will see the two Chinese investors pay a premium of 55% for the purchase of this stock and appoint a director each to its board of directors.
We look forward to providing Vipshop with our audiences, marketing solutions, and payment support to help the company provide branded apparel and other product categories to China's rising middle class.
Martin Lau, President, Tencent
According to industry experts, the move was made by Tencent, first company in Asia to reach a market cap of over $500 billion, in order to compete with Alibaba, another behemoth in the area that has recently been growing at an explosive pace.
"Tencent and JD need this assistance given Alibaba's spectacular execution in 2017" Eric Wen, founder of Blue Lotus Capital told Bloomberg. "Tencent needs to go from the backstage to the front stage and that's what they've done. Tencent has acquired a stake in Yonghui and now Vipshop, this is something JD cannot pull off by itself."
Despite holding stable revenues for the past four quarters, Vipshop's profit margin nearly halved over the past two quarters. Alibaba on the other hand has grown revenue 61% last quarter and is starting to push through to overseas markets.
Following the deal closing, Tencent is set to allow Vipshop to capture users from its WeChat messaging platform, whereas JD.com plans to integrate the fashion retailer into it's own app and assist it in reaching sales targets, according to a statement released by the company.