Pinduoduo stock plunges after disappointing earnings
E-Commerce founder Colin Huang loses a quarter of his fortune overnight
Chinese e-commerce site Pinduoduo has missed its earnings estimates, sending its stock plunging by 22.89 per cent.
Pinduoduo (PDD), founded in 2015 by chairman and CEO Colin Huang, took on more established Chinese firms such as Alibaba by targeting smaller cities and developing social commerce, whereby purchases can be made by groups, not just individuals. It is the third most popular shopping app in China.
Although PDD reported sales doubling in the three months to September to ¥7.51bn ($1.07bn, £820m), it fell ¥100m short of analyst predictions. Net losses increased from ¥1.1bn a year ago to ¥2.3bn ($330m, £250m).
A 114 per cent increase in sales and marketing spending contributed to these losses, totalling ¥6.9bn ($980m, £760m) in the third quarter. PDD has worked to improve its reputation, after some consumers within China claim it sells poorly made products. Alibaba and JD have sought to capitalise on this, targeting the small cities PDD dominates.
The stock plunge has cost Huang nearly a quarter of his fortune. His net worth fell from $21.1bn to $16.3bn (¥114bn, £12.59bn) overnight. On a call to analysts Huang remained bullish, saying: “When there is opportunity, we should spend our money aggressively. We shouldn’t put our money into the piggy bank.”
PDD is still up 40 per cent this year with a total market cap of $36.5bn (¥256bn, £28.19bn).
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