Industry insiders said JD's announcement of a $1 billion share buyback program will reassure investors and boost its currently falling stock price, after authorities in the United States decided not to charge the e-commerce giant's CEO Liu Qiangdong for alleged sexual assault.
JD's American depositary receipts have plunged 52.3 percent in recent months, as the company has grappled with the fallout of the accusations against Liu, and has faced tougher competition from rivals such as Alibaba and Pinduoduo.
The company announced on Wednesday night that its board of directors has authorized a share repurchase program, under which the company may repurchase up to $1 billion of its shares over the next 12 months. The program covers about 3.5 percent of JD's market capitalization.
According to a company statement, the proposed repurchases may be made from time to time on the open market at prevailing market prices, in privately negotiated transactions, in block trades, and through other legally permissible means, depending on market conditions and in accordance with applicable rules and regulations.
Shen Meng, director of boutique investment bank Chanson & Co, said the buyback plan could boost investor confidence, and the cost of repurchasing is relatively low at the moment.
"The repurchase plan seems to be reassuring investors. The fundamental problem lies in JD's corporate governance structure," he said.
Liu's case in the US has reflected shortcomings in the company's corporate governance structure, as the CEO controls nearly 80 percent of JD's voting rights, Shen explained, adding the situation has also flagged the great uncertainty such governance could create for the company's daily operations.
Liu will not face sexual assault charges in the United States, as the Hennepin County Attorney's Office, which is handling the case, said on Dec 21 they could not prove his guilt beyond a reasonable doubt.
Jin Xiangyi, an analyst at Huachuang Securities, agreed that Liu has absolute control over the board of directors, but added the effect of the legal case would be limited in the long run because the e-commerce platform's monthly active users and trading volume are seeing steady growth, and there is no problem with the overall business performance.
JD reported its slowest quarterly revenue growth in the third quarter this year, with net revenue reaching 104.8 billion yuan ($15.3 billion), a 25.1 percent year-on-year increase. Analysts polled by financial data and analytics firm FactSet had estimated that JD would report revenue of 106.09 billion yuan in the third quarter.