Pinduoduo shares fall 15% on disappointing revenue growth

Shares of Pinduoduo fell 15% in early trading of the year as China’s fast-growing e-commerce group reported disappointing revenue growth for the third quarter.

The Shanghai-based company said revenue jumped 51% year-on-year to Rmb 21.5 billion ($3.3 billion) in the quarter ended September 30, but total sales shipments were lower than reported in the first and second quarters.

Pinduoduo “missed top revenue growth [expectations] Robin Zhu, of Bernstein, said, noting that the company has also spent much less than before to attract users.

Additionally, Pinduoduo’s annual number of shoppers grew only 19% year-on-year to 867 million, the slowest user growth since it went public in 2018, shows the app. discount e-commerce is about to run out of new registered users.

“Given our current size, our user growth will certainly be more moderate going forward,” warns Tony Ma, vice president of finance.

Pinduoduo’s slowing growth comes after the e-commerce leader Alibaba earlier this month warned about a slowdown in Chinese consumer spending as continued tightening of regulation drives the country’s biggest tech companies to change.

Before Friday’s drop, New York-listed shares of Pinduoduo were down 62% from their February high. CEO Chen Lei and two other executives switch to sell several companies share in what appears to be their first sale on September 27. Pinduoduo previously did not respond to questions about the sale.

Chen said Pinduoduo is moving “away from our previous focus on sales and marketing in our first five years,” during which the company provided billions of dollars in user acquisition, to a new phase. focus on research and development.

Chen added that Pinduoduo will promote a new generation of young leaders into key positions at the company within a year. It comes after founder Colin Zheng Huang get rid of his formality executive role this spring.

Pinduoduo has reported a second quarter profit since listing, but Chen said the company is putting a profit of Rmb1.6 billion into its charity farming initiative. announced in August as Chinese companies rush to respond to Chinese President Xi Jinping’s call for “common prosperity”.

“Going forward, we plan to do more to contribute to society,” added Chen.

The e-commerce group has poured resources into building its agribusiness, competing with other tech companies to get fruit and vegetables into the hands of Chinese consumers.

These efforts, however, have worried Chinese authorities, who fear tech companies will shift jobs. Pinduoduo and other tech conglomerates were fined by the market regulator for using subsidies earlier this year.

This month, the market regulator said grocery initiatives by tech groups were disrupting existing supply chain developments, disrupting normal prices and putting pressure on jobs. of small merchants, “impact on social stability”.

The regulator is committed to continuing to strengthen regulation of technology platforms.

Bernstein’s Zhu says that while the community group buying space has become more compliant in recent months, “the regulatory redundancy has not completely disappeared”.

Chen said the company has always been “fully accepting and supportive.” [government’s] regulatory measures”.

Meanwhile, food delivery giant Meituan reported that its quarterly net loss increased to Rmb 10.1 billion in Q3 as the company continued to invest heavily in its retail and grocery efforts. own.

The loss includes a Rmb3.4 billion fine from China’s antitrust regulator last month for abusing its market position.

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