Ex-Googler becomes China’s 12th richest person

Bloomberg

Chinese e-commerce operator Pinduoduo Inc. rose as much as 44 percent on its first day of trading in New York after selling raised $1.6 billion in the fourth-largest US initial public offering this year.
The shares, which priced at the top of the marketed range in the IPO, were up 36 percent to $25.88 in New York. The shares priced at the top of the $16-$19 marketed range.
Investors are watching the company in light of volatility among recent Chinese tech debutantes. PDD, as the company is known, carved out a slice of the country’s massive e-commerce market by popularising a format where people spot deals on products from fruit and clothing to tissues, then recruit friends to buy at a discount.
Founded by Colin Huang, a former engineer at Google, the Shanghai-based firm won the backing of Sequoia Capital and social networking giant Tencent Holdings Ltd.
PDD garnered a valuation of as much as $24 billion with its debut. Besides a reputation for low prices, it’s benefited from a large base of users in China’s poorer cities and rural areas. The three-year-old company acts as an online bazaar for independent merchants, handling 4.3 billion orders last year and $41.8 billion of transactions for the year ended June 30, it’s said in filings.
After switching from a direct-sales business model, PDD said it now generates revenue primarily from online marketplace services, taking in $278 million in 2017. In the first quarter of this year, its revenue rose 37-fold
to $220.7 million. But losses widened to almost $80 million last year, reflecting its increasing outlay on marketing.
“To drive eventual and long term profitability PDD must use the IPO capital to grow user numbers with the same rapid pace and sustain growth,” Eleanor Creagh, a market strategist with Saxo Bank, wrote in a note before trading began.
“As lower tier cities become larger and wealthier they will inject further consumption potential into the economy.”
Huang joins the ranks of China’s wealthiest via the IPO, with his stake in the company valued at $9.9 billion based on the listing price. That would make him China’s 16th-richest person, ahead of Richard Liu, the founder of China’s No. 2 online retailer JD.com Inc., according to the Bloomberg Billionaires Index.
Huang will own about a 46.8 percent stake after the IPO, assuming an over-allotment option isn’t exercised.
In April, PDD issued more than 250 million shares worth at least $1 billion, based on the IPO pricing, to a company controlled by Huang, according to a filing. He plans to donate some of his PDD shares to two charitable foundations that he intends to establish.
PDD’s IPO was led by Credit Suisse Group AG, Goldman Sachs Group Inc. and China International Capital Corp. Among US IPOs this year, its listing was exceeded only by Axa SA’s US unit at $3.2 billion, Pagseguro Digital Ltd. at $2.6 billion and iQiyi Inc. at $2.4 billion.