The decline in Pinduoduo shares adds to a $ 100,000 million drop since February

Shares of China’s fastest-growing e-commerce company Pinduoduo fell again on Wednesday, adding to a trajectory that has depreciated its market value by $ 100,000 billion since February.

The company reported revenue of Rmb22.2 billion ($ 3.47 billion) in the first quarter, up 239% year-on-year and above analyst expectations, but also maintained a loss of Rmb2.9 billion ($ 454 billion). . The $ 160 billion purchase app hasn’t made a profit from the 2018 list.

Shares of Pinduoduo’s Nasdaq shares fell to 7.1 percent and extended a sell-off that began in February, along with other technology stocks in China. The stock market ended the session with a 5.5% drop.

Shares continued to fall after the unexpected departure of founder Colin Huang he resigned in March “To focus on his passion for life sciences.”

Macquarie analysts downgraded the company’s outlook after Huang’s departure. “Our decline is driven by sudden changes in management and its possible consequences, as well as the uncertainty of a change in business model,” they wrote.

The Chinese technology sector has also been studied by the authorities, and a a consumer group attached to the government He criticized Shanghai Pinduoduo’s business practices earlier this month.

Pinduoduo was keen on Wednesday to highlight the positive impact it has had on society. Chen Lei, CEO, said he has “catalyzed the creation of millions of jobs” through the food distribution business. Strategy Vice President David Liu said Pinduoduo is “generating a lot of social benefits”.

Robin Zhu of Bernstein said Pinduoduo has exceeded analysts ’expectations in both the top and bottom lines. “People lost less money than they expected,” he said.

The fact that the company has pushed for direct online sales – that is, the site now has inventory and earns it from the sale of goods to buyers – has surprised some analysts. Since its listing in 2018, the company has mostly managed to sell advertising space to marketers who are competing to get buyers ’attention in its market.

Direct sales accounted for 23% of Pinduoduo’s revenue in the first quarter, up from 20% in the fourth quarter.

The company has 8.6 million merchants on its platform, but said it needed to take the step of buying and selling goods “to temporarily meet the demand of our users.” [for] products that our traders cannot afford ”. Pinduoduo said it sells a “diverse” range of products, but told investors little about the fledgling business that lost roughly Rmb1.4bn last year.

“It looks like a weird start to direct sales,” Mark Webb told GMT Research. “I don’t understand the reason. What products were third-party merchants unable to supply PDD?”

Pinduoduo’s rapid growth has been cheap and market and marketing expenses have risen to Rmb13bn in the quarter, which is 92% of ad sales revenue.

Pinduoduo received $ 8 billion in debt and equity financing last year as it raised its share price to expand its plan to transport farm goods directly to buyers ’doors.

Although Zhu was expensive, Zhu said the food business would increase customers’ “frequency of use and commitment” and eventually lead to profits.