Pinduoduo: FPO Price is Set at USD 25 Per ADS
Pinduoduo filed a latest prospectus to SEC on February 8th, 2019. In the prospectus, the FPO price per ADS is set as USD 25, which is 32% higher than its IPO price six months ago.
Previously on February 6th, 2019, EqualOcean reported that Pinduoduo had planned to launch follow-on public offering (FPO) and on February 8th, 2019, Pinduoduo filed the latest prospectus for the FPO with more related details. The final FPO price is set at USD 25 per American Depositary Shares (ADS) and total issue amount is 55 million ADS representing for 220 million Class A ordinary shares. The FPO could effectively increase the share volume held by public investors.
Pinduoduo would collect net proceeds from the FPO of approximately USD 979 million or USD 1,180 million if underwriters choose to exercise their option to purchase additional shares in full. The raised fund would be mainly used in developing business operation and R&D in Pinduoduo’s infrastructure and technologies. Besides the FPO plan, Pinduoduo also released several critical data and a change from “emerging growth company” to “controlled company” after December 31st, 2018.
As Pinduoduo defined its position as “Disney + Costco”, the shopping experience on Pinduoduo indeed knocked a new door for e-commerce retail platforms. The Pin experience is similar to Groupon, which is common in China and other countries, but Pinduoduo pushes Pin to a climax and swiftly became one of the leaders in e-commerce within three years. As released in the prospectus, Pinduoduo’s GMV in 2018 was CNY 741.6 billion (USD 68.7 billion), while in 2017, the number was CNY 141.2 billion (USD 20.6 billion); the number of active buyers on Pinduoduo in 2018 increased to 418 million from 2017’s 245 million. The rapid growth demands a solid foundation to support, and as indicated in the prospectus, part of the proceeds collected from the FPO would be spent on enhancing infrastructure and business operation.
Since the FPO announced during the lunar new year, the new plan that Pinduoduo set for the year has been briefly introduced by EqualOcean. The “New Brand Plan” and “Internet + Agriculture” are two critical initiatives in 2019. Pinduoduo is a platform for retail and hence will face possible risks that e-commerce platforms might encounter, even Amazon released in its annual report that the losses came from counterfeit products increased. Pinduoduo has been troubled by the counterfeit scandals for a long time and it has implemented several rules to solve the problems. Setting rules is a passive and defensive method while the reputation and trust have been endangered by the counterfeit products. The New Brand Plan, as an active solution regarding counterfeit products, is a program to build Pinduoduo’s image while it helps small-sized factories to develop market under Pinduoduo’s supervise. The transparency and digitalization of production process guarantee the quality of products and hence reduce the risks brought by counterfeit products on the platform along with the expansion of New Brand Plan.