Chinese billionaire's net worth drops US$2.8b as PDD shares fall

Beijing

ONE of China's freshly minted billionaires saw his net worth plunge US$2.8 billion after the e-commerce company that he founded, Pinduoduo Inc, tumbled in US trading on mounting losses.

The Shanghai-based company reported that revenue leapt more than fourfold during the quarter ended in December, but lost 2.4 billion yuan (S$483.8 million) compared with a small profit a year earlier. PDD shares dropped 17 per cent, the most since it went public last year. That cut the net worth of founder Colin Huang to US$13 billion from US$15.8 billion, according to the Bloomberg Billionaires Index.

Mr Huang, a prolific entrepreneur who started his career at Google, founded PDD in 2015 as Alibaba Group Holding Ltd and other existing e-commerce operators appeared to have a lock on the market. Yet he distinguished the startup by developing a mobile app with game-like characteristics and promoting group-buying discounts over social media such as WeChat. PDD rapidly became China's third-largest online mall, behind Alibaba and JD.com Inc.

Now however, rivals are employing the same strategies of group discounts and expansion in smaller cities, backed by better established logistics networks and larger balance sheets. PDD's losses climbed as it spent more heavily on advertising and the technology needed to grow its e-commerce share.

"More and more players are looking at lower tier cities, and they're also trying to mimic what PDD is currently doing. But I think the greater emphasis from the competitors actually is good for increasing the size of the pie," Mr Huang said on a conference call with investors. "We can also see that our users are visiting more frequently, and are spending more on our platform. This is a healthy indication that they are more pleased with what we offer."

PDD said that it was in no hurry to monetise because it still needed to demonstrate the company's value to shoppers and merchants - a strategy that could impact its revenue in the near future. The company counts WeChat operator Tencent Holdings Ltd as a major backer, and has more than US$3 billion in cash and equivalents on its balance sheet.

"We expect PDD's GMV (gross merchandise volume) and user growth to remain solid going forward," CICC analyst Natalie Wu said in a note to clients before the earnings were posted. "Its unique value proposition and rich traffic hinder existing giants or new players to compete directly."

While China's economy is slowing, PDD's low-cost focus will help it win more customers as consumers tighten their belts, she added.

GMV, or the total value of goods transactions, rose three-fold to 471.6 billion yuan in the 12-month period ended December.

The number of shoppers who used the app at least once in 2018 rose 71 per cent to 418.5 million from 244.8 million in 2017.

On its earnings call, the company said that those expenses were driven in large part by online and offline brand building, especially around Singles' Day and New Year's countdown opportunities. BLOOMBERG