Walmart's $3.6bn JD.com divestment drives August share sales surge, as markets seize unique opportunity
Walmart Inc.’s $3.6bn divestment from China’s JD.com Inc. played a key role in making August the busiest month for US sales of new and existing shares since May, according to BNN Bloomberg.
By August 28, over $13bn worth of shares had been traded, excluding initial public offerings, as reported by Bloomberg.
Walmart's exit from JD.com was part of a broader trend, with other significant transactions including Toronto-Dominion Bank’s $2.5bn sale of Charles Schwab Corp. shares and a Cava Group Inc. shareholder’s divestment of approximately $702m in shares.
These deals took place during the final two weeks of August, typically a quiet period for the equity capital markets as portfolio managers and investment banks often take their summer holidays. In contrast, only $162m was raised during the same period last year, according to Bloomberg data.
Arnaud Blanchard, global co-head of equity capital markets at Morgan Stanley, who was the sole bookrunner for Walmart’s JD.com offering, highlighted that August presented a unique opportunity.
“August looked like a relatively good window where there was limited competing supply and a constructive market backdrop,” he said. He noted that the timing turned out to be more favourable than is usually expected for August.
The transactions were supported by a recovery in the S&P 500 Index, which approached near-record highs after Federal Reserve Chair Jerome Powell suggested that “the time has come” for US interest rate cuts.
Additionally, the Cboe Volatility Index (VIX) decreased to the mid-to-high teens following a sharp rise earlier in August.
Artal International SCA, a long-time investor in Cava since its Series A round in 2015, took advantage of these favourable market conditions by offering 6 million shares in the Mediterranean restaurant chain at its highest-ever closing price of $125.80 on Monday.
Cava had initially debuted around a year ago with an offer price of $22 per share.
Walmart explained that this divestment aligns with its broader strategy to “align our portfolio.” The company emphasized that selling its JD.com stake allows it to concentrate on its core operations in China, including Walmart China and Sam’s Club, while reallocating capital towards other priorities.
Charles Schwab declined to comment on the transaction, and representatives for Cava, JD.com, and Artal did not immediately respond to requests for comment.
The favourable market conditions in 2024 have encouraged an acceleration in strategic sell-downs, particularly for investments that have matured over several years.
This trend was evident earlier this year when Johnson & Johnson completed a $3.6bn deal to sell its remaining stake in Kenvue Inc., which it took public in May 2023.
Blanchard noted that many large corporations are increasingly focusing on optimizing their balance sheets and capital allocation strategies. He observed that monetizing holdings at attractive prices has become a common practice.
Blanchard expects that the sale of shares in listed companies will continue into the final quarter of the year, stating, “Our pipeline is robust. With the US election, the timeline feels more compressed than usual. So, for anyone who has plans to access the markets, September is actually going to be a good window.”
