JD Health soars 56% in Hong Kong IPO, valuing telehealth giant at $40B

On a Tuesday in early December 2020, JD Health International opened for trading on the Hong Kong stock exchange and immediately caught fire. The shares that had priced at 70.58 Hong Kong dollars the night before climbed through the morning, peaked at 123.9, and closed the day at 110—a gain of 56 percent. By day's end, the company was worth more than 40 billion dollars. It was one of the strongest debuts Hong Kong had seen in years.

JD Health is not a household name in most of the world, but it is a significant player in Chinese healthcare. The company, owned by the ecommerce giant JD.com, runs an online platform where patients can consult with doctors and buy medicine without leaving home. During the height of China's COVID-19 outbreak earlier that year, JD Health was among the platforms offering guidance to people worried they might have the virus. The pandemic had accelerated something that was already happening—a shift toward digital medicine—and JD Health was positioned at the center of it.

The IPO raised 3.48 billion dollars, making it Hong Kong's largest public offering of 2020. The company had started the year with an initial valuation of 29 billion dollars based on the offering price. By the close of trading, that number had jumped to 40 billion. The speed and scale of the move caught the attention of market analysts. Dickie Wong, a research executive at Kingston Securities, explained that investors were rushing to buy before the stock qualified for inclusion in the Shanghai-Hong Kong Stock Connect and the Hang Seng technology index. Once a stock enters those indices, index funds are forced to buy it regardless of their own views on the company. Smart money was getting ahead of that mechanical demand.

The numbers behind JD Health's growth were substantial. The company reported 72.5 million annual active users at the end of June, up 36 percent from the year before. The pandemic, according to Chief Executive Xin Lijun, had created what he called a "revolutionary impact" on healthcare. Patients were now willing to seek treatment online. Doctors were willing to provide it. The shift was real and it was accelerating. Xin suggested the company might use some of its new capital to acquire physical pharmacies and bring them into its digital network—a bet that the future of healthcare would blend online and offline.

But not everyone was bullish on what came next. Kenny Ng, an analyst at Everbright Sun Hung Kai, warned that the stock's rapid ascent made it vulnerable to a sharp pullback. IPO investors who had bought at 70.58 were already sitting on a 40 percent gain. For many of them, that would be enough. Profit-taking could arrive quickly if the stock stayed above 100 Hong Kong dollars. The broader Hong Kong market, meanwhile, had closed down 0.76 percent that day—its second consecutive day in negative territory. JD Health's surge stood out precisely because the rest of the market was struggling.

The IPO was part of a larger story about Hong Kong's capital markets in 2020. The exchange had processed more than 100 deals that year, raising over 25 billion dollars—on track for the best year in a decade. Including secondary listings, the total climbed to 39.1 billion. JD Health's debut was the largest, but bankers expected more activity before the year ended. The company had joined a small club of Hong Kong IPOs that had more than doubled on their first day. Alibaba.com had closed 142 percent higher in 2007. Smoore International had gained 139 percent in July. China Literature had risen 89 percent in 2017. JD Health, at 56 percent, was strong but not unprecedented. Still, for a company valued at 40 billion dollars, it was a remarkable show of investor appetite.