This strategy seeks to increase shareholder value as the company faces fierce competition in e-commerce.
JD.com announced on Tuesday that its board of directors approved a new $5 billion share repurchase programwhich will come into effect in September, allowing the Chinese e-commerce giant to buy back its shares over the next 36 months. It should be noted that this stock has its Cedear, which is listed on the Buenos Aires market under the ticker $JD and has an approximate value of $8,350.
Following the announcement, the company’s U.S.-listed shares rose 5.1% in premarket trading. JD.com, which last week beat earnings forecasts for the June quarter, and rivals such as Alibaba, have been seeking to ease investor concerns about China’s sluggish retail market through major share buybacks.
This is JD.com’s second share buyback announcement this yearafter having announced a $3 billion buyback in March. Alibaba announced a $25 billion buyback in FebruaryChinese consumers have been reluctant to spend due to a macroeconomic slowdown, a prolonged property crisis and concerns about job security, prompting JD.com to offer regular discounts and promotions.
The trend in large retailers
All of China’s major e-commerce retailers have been engaged in fierce competition for market share in the world’s largest e-commerce market.
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Monday’s news that PDD Holdings (PDD.O), which operates discount retailers Pinduoduo in China and Temu overseas, missed revenue expectations and warned of an uncertain outlook, wiped $55 billion off its market capitalization. Shares of U.S.-listed stocks JD.com and Alibaba (NYSE: Alibaba) also suffered.
Earlier this month, retailer Walmart (WMT.N) sold its entire roughly $3.7 billion stake in JD.comending an eight-year investment in the company to focus on its own businesses in China, though the move also raised questions about how well positioned JD.com is to succeed in the current environment.
What is a share repurchase plan?
A stock repurchase plan is a strategy that companies use to buy back their own shares on the market. This reduces the total number of shares outstanding, which can have several effects:
- Increased share value: By reducing the supply of shares, the value of the remaining shares may increase, benefiting current shareholders.
- Increased shareholder ownership: As there are fewer shares outstanding, each shareholder’s stake in the company increases proportionally.
- Positive signal to the market: When a company announces a buyback plan, it can be interpreted as a signal that the company believes its shares are undervalued or that it is confident in its financial future.
Source: Ambito
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