Bloomberg
China’s third richest person gives up control of e-commerce phenomenon
(Bloomberg) – The billionaire president of Pinduoduo Inc. left the board, relinquishing control of China’s fastest growing e-commerce company the same day he announced that his user base had surpassed that of Alibaba Group Holding Ltd .. Founder Colin Huang will be replaced by Lei Chen, who holds his position as chief executive, the company said in a statement on Wednesday. The move cements Huang’s withdrawal from the corporation that helped him become China’s third richest man after he stepped down as CEO last year. Huang is overburdening his co-founder Chen with the task of sustaining an extraordinary rate of growth. Sales in the December quarter increased 146% to 26.5 billion yuan ($ 4.1 billion), exceeding the forecast average of 19.3 billion yuan. This is several times the pace of e-commerce rivals Alibaba and JD.com Inc., fueled by growing demand for groceries and as more shoppers in less developed cities venture online. “The departure had an air of inevitability in light of Huang’s resignation as CEO last July,” wrote Robin Zhu, an analyst at Bernstein, in a research note. “But the moment came as a surprise, and skeptics will note that China’s internet sector turns 0 to 1 when the iconic founders leave the building.” Shares fell more than 7% in New York, giving up a fraction of its 370% gain over last year, after Citigroup analysts pointed out that the growth in e-commerce volumes was below expectations. The gross value of the commodity rose 66% in 2020, suggesting a quarterly growth of 57%, wrote Alicia Yap of Citi. Read more: Your wealth has increased by $ 25 billion. So Jack Ma’s Rival QuitPinduoduo aims to become the biggest grocer in the world, Chen said. To achieve this goal, the company intends to invest in a logistics infrastructure platform with a focus on agriculture in the coming years. After stepping down as chairman of the board, Huang will give up the super 1:10 voting rights associated with his shares in Pinduoduo. He also promised to extend the period of restriction of his shares for another three years, according to a company statement. His departure limits a meteoric rise even by Chinese Internet industry standards, creating a personal fortune of $ 57 billion and $ 180 billion listed over a period of about six years with the help of heavy advertising. Pinduoduo’s shares rose more than four times last year and hit a record high on February 17, although the shares rebounded after a broader sale of technology and China’s scrutiny from its internet companies. Huang, a former Google engineer, will focus more on long-term initiatives, including research in food and life sciences, the company said. In 2017, the billionaire said he would hardly spend the rest of his life in the PDD, saying in a letter to employees that he wanted to delegate more responsibility to younger colleagues to keep his entrepreneurial spirit alive. “I hope that my resignation from the chairman of the board will help this young man to become an independent adult,” Huang said in a letter to shareholders, referring to the PDD. “Although I can no longer become a true scientist, I would feel very lucky and blessed if I had the chance to become a research assistant for the future, possibly a great scientist.” Pinduduo’s annual active consumers rose to 788 million in December, surpassing 779 million users in Alibaba’s online markets. During the recent Spring Festival holiday, Pinduoduo’s daily users briefly outnumbered those of the Taobao mobile app, according to researcher QuestMobile, highlighting how the company narrowed the gap with its larger rival. The net loss attributable to shareholders in the December quarter decreased to 1.38 billion yuan from 1.75 billion a year earlier, Pinduoduo said in a statement on Wednesday before the US market opened. The gross value of goods in the 12 months ending in December increased by 66% to 1.67 trillion yuan. What Bloomberg Intelligence says is that Pinduoduo’s sales growth may remain robust as it increases the monetization of its sizeable customer and merchant base. The rapid expansion of sales can help to reduce operating losses in the medium term. The company’s expanding shopping ecosystem can become increasingly attractive to merchants looking to advertise. Despite heavy marketing expenses, Pinduoduo’s market model can sustain a high gross margin and can generate profit as revenue reaches a larger scale .– Vey-Sern Ling and Tiffany Tam, analysts Click here to view the report. However, this growth comes at a price. The company faced an online setback earlier this year after an employee in her 20s died after walking home at 1:30 am and another committed suicide. The deaths renewed criticism of the long hours commonly worked on China’s tech giants – a 996 office hour from 9 am to 9 pm, six days a week, plus overtime – and prompted authorities to open an investigation into working conditions in Pinduoduo. more: Pinduoduo Worker’s Death Spurs Investigation, Online FuroreYour online groceries business is also under scrutiny by antitrust regulators. Earlier this month, the Pinduoduo community group buying business was fined along with four other operators for excessive subsidies in the second half of 2020, a measure that disrupted the market order, according to the State Administration of Market Regulation. For more articles like this, please visit us at bloomberg.comSubscribe now to stay on top of the most trusted business news source. © 2021 Bloomberg LP