Chinese E-Commerce Startup, Pinduoduo, Prices US IPO at Top Range and Raises $1.6 Billion

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The Chinese online group discounter Pinduoduo Inc (PDD.O) priced its US IPO at $19 USD per share and raised a whopping $1.6 billion in the second ever largest US float by a Chinese firm this year.

The pricing values money-losing Pinduoduo- which has Chinese Internet magnate Tencent Holdings Ltd (0700.HK) as their main backer- at $23.8 billion, which includes all outstanding share options, compared with a valuation of $15 billion after a funding round back in April.

This rapidly expanding company enables its consumers to group together to get better product discounts from merchants selling everything from clothes, to kitchenware and gadgets.  It offered 85.6 million ADS or about 6.8%of its enlarged share capital, at $16 to $19 each.  (Source:  Reuters, “China’s Pinduoduo prices US IPO at top range, raises $1.6 billion: sources”)

Pinduoduo declined to comment on the pricing and the people commenting declined to be named because they were not authorized to speak with the media.

Pinduoduo is just the latest of many Chinese Tech firms launching into international capital markets to bolster coffers in a backdrop of ever-escalating competition among domestic rivals.  Those rivals are, most notably, the E-commerce heavy hitters Alibaba Group Holdings Ltd and JD.com Inc.

Pinduoduo will take their place among numerous other Chinese listings in New York this year, even as trade tariffs between China and the US continue to cause global market distress.

Chinese video streaming service Iqiyi Inc (IQ.O) raised $2.42 billion from a Nasdaq IPO back in March, along with Tencent Music Entertainment, China’s biggest music streaming company, who plans to raise $4 billion for a US IPO planned for this October.

Pinduoduo was set up by a former Google engineer Colin Huang in 2015, and will begin trading on Nasdaq on Thursday under the symbol PDD.

US regulatory filings have shown that it has already enticed 300 million active buyers and more then 1 million sales merchants to its e-commerce platform.

Investors and analysts both attribute the rapid growth of Pinduoduo to Tencent’s messaging to shopping app WeChat, which directs traffic of its over 1 billion users to Pinduoduo.

“We believe WeChat accounts for the majority of buyer traffic, and Pinduoduo could not have built up its large user base cost-effectively and rapidly without WeChat,” wrote Arun George, a tech analyst who publishes independent research platform Smartkarma.

It is definitely no secret that Pinduoduo’s revenue has grown rapidly, reaching 1.38 billion yuan in January-March from only 37 million yuan, in the same period, a year earlier.  Its net loss however, remained broadly steady at 201 million yuan.

Pinduoduo is definitely going to be an IPO you want to keep your eye on as it enters the US markets this week.

 

 

 

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