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Pinduoduo to Raise More Than $1 Billion in Alibaba Challenge

Drew Singer and Meghan Genovese
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Pinduoduo to Raise More Than $1 Billion in Alibaba Challenge

(Bloomberg) -- China’s upstart e-commerce company Pinduoduo Inc. and its shareholders filed to sell more than 50 million shares in a secondary offering that could raise about $1.5 billion after the company’s public debut last year.

The Shanghai-based company plans to sell 37 million American depository shares, while investors market 14.8 million, according to a securities filing. The shares fell 4.6 percent in U.S. trading Wednesday to $28.94. The lockup period for PDD’s shares expired last month and the selling shareholders include Banyan Partners, Sun Vantage Investment and Lightspeed China.

PDD has seen revenue soar since its founding in 2015, challenging the conventional wisdom that e-commerce giants Alibaba Group Holding Ltd. and JD.com Inc. had an unassailable lead in the market. Founder Colin Huang built the PDD app as a blend of commerce and entertainment, then aligned himself with Tencent Holdings Ltd. by embedding his service into its WeChat messaging platform. Revenue grew an estimated five-fold in 2018 to about $1.9 billion and are projected to double this year to $4.1 billion.

Read More: Ex-Google Engineer Builds $1.5 Billion Startup in 21 Months

But this expansion is expensive. Operating losses are estimated to have been $1.25 billion last year, according to data compiled by Bloomberg. The offering, from which PDD says it expects to receive $1.1 billion or $1.25 billion if underwriters exercise an option to purchase additional shares, will help fuel future growth.

PDD’s shares have climbed in recent weeks, allowing it to raise more money from a secondary offering. The stock had advanced 35 percent this year through Tuesday to give it a market value of about $34 billion.

In a letter to shareholders included in the secondary offering and the initial public offering, Huang declared that PDD is “not a conventional company.”

“Pinduoduo is dedicated to investing in the future and will always focus on the long term,” he wrote. “It might appear too aggressive or too conservative at times. However, it always follows the basic and simple principle—growing its long term intrinsic value.”

(An earlier version of this story corrected the names of the selling shareholders.)

(Updates with U.S. trading.)

To contact the reporters on this story: Drew Singer in New York at dsinger28@bloomberg.net;Meghan Genovese in New York at mgenovese@bloomberg.net

To contact the editors responsible for this story: Peter Elstrom at pelstrom@bloomberg.net, Robert Fenner

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