JD.com unit dives 46% post disclosing investigation of 'suspicious' revenue

By Jane Zhang

A high-profile JD.com Inc. unit disclosed it’s investigating “suspicious practices” including the overstatement of some 1 billion yuan ($140 million) of revenue and costs, triggering a 46% collapse in its share price.
 

Dada Nexus Ltd. 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. JD.com slid 2% in Hong Kong on Tuesday.

Dada, which operates neighborhood platform JD Daojia and delivery service Dada Now, said it’s 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 years as consumers sought to buy closer to home. But the worsening economic environment and keen competition from Meituan and Alibaba Group Holding Ltd. may have begun to stall their growth.

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

What Bloomberg Intelligence Says
 

The admission by Dada Nexus, 52%-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 last year may be steeper than reported, trimming JD.com’s margin gain in the period.

- Catherine Lim and Trini Tan, analysts