Shares of China’s fastest-growing e-commerce company Pinduoduo fell again on Wednesday, adding to the level that has pushed back $ 100 billion from its market value since February.
The company reported first-quarter revenue of Rmb22.2 billion ($ 3.47 billion), up 239 percent year-on-year from analysts’ expectations, but posted a net loss of Rs 2.9 billion ($ 454 million). The $ 160 billion shopping app has not made a profit since its 2018 listing.
Shares of Pinduoduo listed on the Nasdaq fell as much as 7.1%, extending sales that began in February with other Chinese tech stocks. Shares ended the session down 5.5 percent.
Shares continued to fall after the sudden departure of founder Colin Huang, who left March “Focus on his passion for the life sciences.”
Macquarie analysts downgraded the rating for the company’s forecasts after Huang’s departure. “Our downgrade focuses on sudden changes in management, the possible consequences, as well as the uncertainty of a change in business model,” they wrote.
China’s technology sector has also come to the attention of the authorities A group of consumers attached to the government Shanghai criticized Pinduoduo’s business practices earlier this month.
On Wednesday, Pinduoduo wanted to emphasize his positive impact on society. Chen Lei, CEO, said it had “catalyzed the creation of millions of jobs” by delivering goods through his business. Strategy Vice President David Lew said Pinduoduo “creates a lot of social benefits.”
Robin Hu, from Bernstein, says Pinduoduo has exceeded analysts’ expectations at both the top and bottom lines. “They lost less money than people expected,” he said.
The company’s push for direct online sales, which means the site now maintains inventory and buys products from customers, has puzzled some analysts. Since its listing in 2018, the company has mainly generated revenue from the sale of advertising slot machines to its market vendors who seek the attention of buyers.
Direct sales accounted for 23 percent of Pinduoduo’s revenue in the first quarter, up from 20 percent in the fourth quarter.
The company has 8.6 million merchants on its platform, but said it had to intervene to buy and sell products “to temporarily meet the demand of our customers.” [for] products that our merchants cannot afford. ” Pinduoduo said it was selling a “diverse range” of products, but said little to investors about the start-up business, which lost about 1.4 billion rubles last year.
“Just starting a sale seems really weird,” Mark Webb told GMT Research. “I do not understand the substantiation. What goods could third-party merchants not be able to supply that the PDD could? ”
Pinduoduo’s rapid growth is driven by cheap deals, and its sales and marketing costs reached 92% of Rmb13bn or advertising revenue in the quarter. Pinduoduo says the weak first-quarter season sales were one of the costs that increased compared to the previous quarters.
Last year, Pinduoduo raised $ 8 billion in equity financing as it capitalized on its rising share price by launching a plan to move agricultural products directly to buyers.
Huun, running a cost-effective enterprise, said the grocery business would increase its “frequency of use և engagement” և and eventually make a profit.