JD shares fall 7pc on CEO’s arrest

jd sports
LEEDS, UK - 15 NOVEMBER 2015. JD Sports Shop at Kirkstall Bridge in Leeds

Shares in JD.com Inc. fell seven percent on Tuesday morning, following the brief arrest of the retailer’s CEO.

Richard Liu was arrested in Minneapolis on 31 August morning for “criminal sexual conduct” and then later released on 31 September, where he soon returned to China.

The company said on its official Weibo social media account that the police have found no misconduct in their investigation against the group’s CEO.

JD.com is backed by Walmart Inc (NYSE: WMT), Alphabet Inc’s (NASDAQ: GOOG) Google and China’s Tencent Holdings (HKG: 0700). 

Rob Sanderson of MKM Partners said: “The incident looks awful of course.”

“If this spirals as a media focus, negative attention could offset some of the positives associated with endorsement by Walmart and Google.”

“Negative publicity could also compromise JD.com’s ability to attract international brands to its marketplace, which has been a top focus of the CEO over the past two years or so,” he added.

“This does, however, cast another shadow on credibility and ethics, especially after the 2015 incident in Australia,” he said.

A guest at a party that the JD.com CEO hosted in Sydney was convicted of sexually assaulting another guest following the event, however, there was no accusation of any misconduct by Liu.

Mark Natkin, managing director of Beijing-based Marbridge Consulting, said: “Investors may treat the stock cautiously for the next short while as they wait to see how this issue is resolved. But I suspect it will likely not come to much and that it won’t have any major long-term impact on the stock.”

Vey-sern Ling and Tiffany Tam, analysts for Bloomberg Intelligence, said in a report on Monday: “The arrest of JD.com’s chairman and CEO in the U.S. should not immediately impact the company’s operations.”

Shares in the group (NASDAQ: JD) are down 5.41 percent at 29,60 (1638GMT).