Chinese grocery delivery company clings to earnings after slashing IPO
Employees at the Dingdong grocery delivery company pack vegetables for orders that the company claims customers can receive in about 30 minutes.
BEIJING – Chinese grocery delivery company Dingdong closed its US IPO on Tuesday up 2 cents, after a 70% reduction in the size of the offering.
This poor performance comes amid a rise in Chinese stock quotes in the United States and concerns about the growth of the grocery delivery industry, in which tech giants Alibaba, Meituan and JD.com have all invested. in a significative way.
During its IPO, Dingdong still gained a market value of 5.5 billion dollars. That’s more than double the value of Tencent-backed rival Missfresh, which fell more than 25% on its Nasdaq debut on Friday.
Earlier this week, Dingdong has announced that it will price its IPO on the New York Stock Exchange at $ 23.50 per share, at the low end of the proposed range and with less than 30% of the original number of shares. Dingdong thus raised 95.69 million dollars, against an offer which could have reached 357 million dollars.
Founder and CEO Liang Changlin told CNBC’s Eunice Yoon on Tuesday that he plans to use the proceeds of the IPO to grow the business in China and invest in technology and talent.
âWe just finished a Series D funding round, and everyone knows we raised $ 1.03 billion,â he said in Mandarin, according to a CNBC translation. âSo from our perspective, the IPO itself is a big milestone and how much money we’ve raised isn’t that critical. We have adequate cash flow and that’s our situation. “
Liang owns a 30% stake in the company.
Dingdong said in its prospectus that it has 1.45 billion yuan ($ 226.56 million) in cash, cash equivalents and restricted cash. With expected cash flow from financing activities, the company said it plans to meet its financial needs for at least 12 months.
The company said it operates in 29 cities in China, with a monthly average of 6.9 million first-quarter transaction users and a gross value of goods (GMV) of 4.3 billion yuan. That’s against 2.92 billion yuan in the same period a year ago.
GMV measures the total value of goods sold over a period of time.
However, Dingdong also reported a net loss of 1.38 billion yuan in the first quarter, up from 244.5 million yuan a year ago.
In May, SoftBank invested $ 330 million in Dingdong, following a $ 700 million investment a month earlier from Coatue, Sequoia Capital and others, according to adviser Cygnus Equity.
As the demand for delivery from Chinese consumers increases, Dingdong says it can send fresh produce in about 30 minutes. The company’s strategy is to work out of warehouses, rather than retail stores that need user-friendly interior design. Location can also increase costs.
Liang asserted that Dingdong has experienced an average growth of 300% per year over the past three years and is confident in the “booming” demand for grocery delivery in China.
âIf something becomes popular during a pandemic but wears off when the pandemic is over, then it’s not a good deal,â he said. For Dingdong, “our price per order may have dropped a little, but the strength of orders is there. We therefore believe that the pandemic has only accelerated our development.”