Is A JD.Com Takeover Brewing?

Back in March 2014, before  JD.com  came public in an IPO on the Nasdaq, the company announced that it had received a $214.7 million cash payment from  Tencent Holdings , Asia's biggest internet company in exchange for a 15% stake in JD. In addition, Tencent Holdings had also agreed to transfer transfer its e-commerce businesses QQ Wanggou and Paipai and a minority stake in Yixun to JD.com.

Here we are a couple of years later and according to a SEC Filing (Schedule 13D-A) dated August 17, 2016, Tencent Holdings has been quietly adding to its stake in JD.com.

Per the filing with the SEC last week, Tencent Holdings has been steadily acquiring JD.com ADS and Class A shares in open market purchased since that initial investment back in March 2014.

On December 8, 2014, Huang River (a wholly owned subsidiary of Tencent Holdings) purchased an aggregate of 6,302,521 ADSs, representing 12,605,042 Class A Shares, in the Open Market Purchases. Between March 3, 2016 and March 7, 2016 (both days inclusive), Huang River purchased an aggregate of 1,000,000 ADSs, representing 2,000,000 Class A Shares, in the Open Market Purchases. Between August 12, 2016 and August 18, 2016 (both days inclusive), Huang River purchased an aggregate of 8,016,581ADSs, representing 16,027,162 Class A Shares, in the Open Market Purchases.

As of the date of this Statement (August 17, 2016), each Reporting Person may be deemed to have beneficial ownership and shared power to vote or direct the vote of 516,883,597 Class A Shares (including 15,319,102 ADSs representing 30,638,204 Class A Shares), representing approximately 21.25% of the outstanding Class A Shares, based on the total number of Class A Shares outstanding as of June 20, 2016, which was 2,432,653,305.

Given the steadily increasing stake purchased by Tencent Limited (via its wholly-owned subsidiary, Huang River) it seems a matter of time before Tencent makes an offer for all of JD.com.

Why else would Tencent be making open market purchases of JD.com and not a private placement directly via the latter which could be of benefit to both companies? Maybe, a cheaper price for Tencent Holdings and cash for JD.com.

We shall see soon enough.

Incidentally, JD.com is controlled by Russian businessman Yuri Milner's DST Global.

Lest one forget, just a month or so ago Walmart transferred its Chinese internet operations to JD.com one change for approximately 145 million shares.

I have taken an opening long position in JD.com just last week.

(Long JD calls)