China’s second-largest ecommerce platform, Pinduoduo, is planning to raise as much as $5.6bn in new debt and equity financing to take on rivals Alibaba and JD.com and build a logistics network to sell farm goods online.
Pinduoduo’s New York-listed share price has surged 269 per cent this year as the lossmaking company’s revenue and order volume have grown, giving it a market value of $170bn.
The Tencent-backed company has been chipping away at ecommerce leader Alibaba’s dominance with cheap goods that have attracted millions of shoppers. In the third quarter, its annual customer count stood at 731m, not far off Alibaba’s 757m.
But Pinduoduo spends heavily to subsidise goods on its platform, booking sales and marketing expenses that exceeded its total revenue in the first quarter. By the third quarter, those costs totalled 71 per cent of revenue.
The planned financing would bring Pinduoduo’s total fundraising as a public company to roughly $10.6bn, including its $1.7bn public offering in 2018.
Pinduoduo said it was looking to invest in “agricultural logistics infrastructure and responsive manufacturing”, and would use the funds to “strengthen its balance sheet” and expand its operations.
“We are seeing large-scale changes in consumer habits as a result of Covid-19, which are accelerating digital transformation across different sectors,” said Chen Lei, Pinduoduo’s chief executive. “We are prepared to invest capital and resources to improve our platform and build infrastructure to capture key opportunities.”
The Nasdaq-listed ecommerce company said it planned to sell at least 22m American depositary receipts, putting it on track to raise $3.1bn based on Monday’s closing stock price of $142.03. That total could climb to almost $3.6bn if a 15 per cent overallotment option is exercised.
Pinduoduo said it would also raise at least $1.75bn from the issuance of convertible bonds, with an overallotment option allowing banks on the deal to raise a further $250m if demand was strong.
Last week, the company reported that revenue in the third quarter rose 89 per cent from the same period last year, while its net loss narrowed to Rmb785m ($120m).
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