JD.com’s record tumble after rape accusation against CEO Richard Liu puts his stock options under water

JD.com's shares plunged the most on record in the US on Wednesday, extending a decline and putting CEO Richard Liu Qiangdong’s stock options under water, as the market waits to see if prosecutors will bring charges against the billionaire founder, who was arrested for suspected rape last Friday before being later released.

The Beijing-based e-commerce company's American depositary receipts (ADRs) tumbled 10.6 per cent in Nasdaq trading to US$26.30, the steepest percentage fall since its IPO on May 21, 2014. The shares have declined 16 per cent, or US$5 per ADR, since resuming trading on Tuesday after the Labour Day public holiday.

The share price plunge could prove expensive for Liu, who receives virtually all of his compensation in shares. In May 2015, JD.com’s board approved a 10-year compensation plan under which Liu receives a nominal salary of 1 yuan per year and a zero cash bonus but was granted an option to acquire 26 million class A ordinary shares in the company.

The exercise price is US$33.40 per ADR – about US$7 above the current market price – subject to a 10-year vesting schedule with 10 per cent of the award vested on each anniversary of the grant date, according to information in the company’s latest annual report which was confirmed by JD.

“The shares have fallen as a direct result of Liu’s alleged sexual misconduct,” said Li Yi, chief fellow at the Shanghai Academy of Social Sciences. “The share price could rebound though if Liu is not charged, on the back of its business operations.”