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China's JD.Com Higher After Report Of Restructuring

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China's JD.Com Higher After Report Of Restructuring
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Shares of China-based e-commerce giant JD.Com Inc (NASDAQ: JD) were trading higher Thursday after the company is reportedly looking to restructure its largest unit by revenue.

What Happened

JD's largest unit by revenue, JD Mall, will undergo a restructuring that will see the creation of three separate business departments, The Wall Street Journal reported, citing internal documents. The plan was introduced Friday night and will include units that directly service customers, business support services and infrastructure control/risk management.

A spokeswoman confirmed with WSJ that a reorganization is planned to "achieve quality growth" and to "better serve our customers and react to their ever changing demands."

Why It's Important

JD's change comes at a time when investors are concerned with the company's corporate structure in which CEO Liu Qiangdong controls nearly 80 percent of all voting rights, WSJ said. The company's board cannot meet without his presence unless he recuses himself, and this became a more notable issue after the executive was briefly arrested in Minneapolis on suspicion of rape.

The Chinese company's move to change its structure could be seen as an attempt to "change the narrative" surrounding the company, China Market Research Group's Ben Cavender told WSJ. From a public relations point of view, the restructuring move following Minneapolis authorities declining to press any charges against Qiangdong is encouraging, he said. 

What's Next

Some uncertainty remains over what the revamped JD structure will look like, and it "doesn't change the fact that [Qiangdong] has the voting rights and power at the end of the day," Cavender said. Other analysts told WSJ they are skeptical the CEO will diminish his influence on JD behind the scenes.

JD.Com shares were 0.57 percent higher at $21.22 at the time of publication Thursday. 

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Posted-In: Ben Cavender China e-commerce Wall Street JournalNews Emerging Markets Markets Media Best of Benzinga

 

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