Why JD.com Stock Popped 5.9% Today
What happened
Friday was another down day for the market, with the S&P 500 declining 2% and the tech-heavy Nasdaq falling 3%. One stock defying the downturn with a rare bit of "good" news was Chinese e-commerce company JD.com (NASDAQ: JD), shares of which popped more than 10% in early trading, and closed the day up 5.9%.
On Friday, The Wall Street Journal reported that the Hennepin County Attorney's Office in Minnesota, which had been investigating rape allegations against JD.com founder and Chinese billionaire Liu Qiangdong, will decline to prosecute the case. According to the county attorney, this "complicated" case had "evidentiary problems" that made a win unlikely.
After six months of relentless losses, JD.com stock finally turned back up today. Image source: Getty Images.
So what
JD.com stock suffered badly when news of its founder's arrest was announced in late August. Then, in October, the stock was caught up in a wide-ranging tech sell-off on Wall Street. Basically, it's been all downhill for JD for the second half of this year, so today's development was a rare bit of good news for the stock.
As the Journal explained, JD.com's bylaws forbid the company's board from meeting without Mr. Liu being present. A conviction in this case, landing Liu in jail, could have posed serious complications for the business above and beyond the fact of a high-ranking executive being convicted for a sex crime. Now that risk has been removed.
Now what
Granted, that's still pretty cold comfort for investors who've seen the value of their investment in JD.com more than halved since mid-June. (That's right -- JD.com was on a downtrend even before its founder was accused of rape.) But at least it's something.
Now, with JD.com stock selling for an apparently attractive 25.4 times free cash flow multiple and pegged for 33% annual profits growth over the next five years, it's possible the stock may gain some positive upwards momentum.
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Rich Smith owns shares of JD.com. The Motley Fool owns shares of and recommends JD.com. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.