Pinduoduo Punished for Plan to Sell Additional Shares

The Shanghai-based company closed today down nearly 8 percent at $28 per share, off $2.33.

Peter H. Frank
    Feb 06, 2019 4:05 PM  PT
Pinduoduo Punished for Plan to Sell Additional Shares
author: Peter H. Frank   

Pinduoduo Inc. (Nasdaq: PDD) got punished by Wall Street today, a day after the discount shopping platform announced it was going back to the market to sell an additional 37 million American depositary shares. 

The Shanghai-based company closed today down nearly 8 percent at $28 per share, off $2.33. 

Pinduoduo, which completed its initial public offering of 85.6 million ADSs in July at $19 per share, filed with the Securities and Exchange Commission yesterday for a follow-on offering of 37 million ADSs as well as 14.8 million shares held by several shareholders. Each ADS represents four class A ordinary shares of the company. 

Among those shareholders planning to sell part of their stake include Banyan Partners Funds and Sun Vantage Investment Ltd., the filing showed, reducing their holdings by about 5 million ADSs each, or roughly 5 percent of their overall holdings. 

Zheng Huang, Pinduoduo's chairman and chief executive officer, would retain 45 percent of overall shares with nearly 90 percent of voting control as the sole holder of Class B shares. Tencent is the largest holder of Class A shares with 786 million, representing 17.1 percent of overall shares and a 3.4 percent voting control. 

Proceeds from the offering would be used to enhance and expand Pinduoduo's business operations, for research and development, and for general corporate purposes and working capital, including potential strategic investments and acquisitions, the company said. 

The additional offering of shares came after the company said its revenue during the third quarter soared 697 percent to $491 million from $61.6 million the year before. Pinduoduo noted a 226 percent increase in its average monthly active users for the quarter. 

The rapid growth was expensive, however. Pinduoduo reported a net loss of $159.9 million, or 16 cents per share, for the third quarter, compared with a loss of $32.5 million, or 8 cents per share, at the same time the year before. 

Pinduoduo was one of the main sponsors in this year's CCTV New Year Gala, which was broadcast Monday in China and is considered the world's most-watched national network TV broadcast with over 700 million viewers across China. By comparison, the audience for American's beloved NFL Super Bowl, typically the most-watched show in the U.S., was around 100 million viewers this year, according to NBC.