JD.com unit dives 46% after disclosing ‘suspicious’ revenue

HONG KONG – A high-profile JD.com unit disclosed it is investigating “suspicious practices” including the overstatement of some one billion yuan (S$187 million) of revenue and costs, triggering a 46 per cent collapse in its share price on Jan 9.

Dada Nexus said it may have overstated roughly 500 million yuan of sales from online advertising and marketing, and about the same amount of operating and support costs.

It withdrew its revenue outlook for 2023 after discovering the issues during a routine audit, Dada said.

Shares of Chinese e-commerce giant JD.com slid 2 per cent in Hong Kong on Jan 9.

Dada, which operates neighbourhood platform JD Daojia and delivery service Dada Now, said it has enlisted independent advisers to assist with a review of the situation.

“In the course of its routine internal audit, certain suspicious practices were identified that may cast doubt on certain revenues from Dada’s online advertising and marketing services, together with Dada’s operations and support costs, for the first three quarters of 2023,” the Chinese parent said in a Hong Kong filing.

JD Daojia and Dada Now, which are often mentioned on JD.com’s earnings conference calls, grew in popularity during the Covid-19 years as consumers sought to buy closer to home.

But the worsening economic environment and keen competition from Meituan and Alibaba Group Holding may have begun to stall their growth.

JD.com representatives referred Bloomberg News to the twin statements and declined further comment.

Bloomberg Intelligence analysts said the admission by Dada Nexus – 52 per cent-owned by JD.com – that an audit found issues with its online marketing revenue and costs will raise doubt on the parent’s ability to compete with rivals such as Meituan, Alibaba‘s Ele.me and Douyin in the more preferable on-demand retail services,

Dada’s January-September operating loss in 2023 may be steeper than reported, trimming JD.com’s margin gain in the period, they added. BLOOMBERG

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