Pinduoduo Stock Tumbles 8% on Net Loss; CEO Says Still Early in Monetizing

Pinduoduo’s shares dropped 8 percent to $20.78 apiece Monday after the platform reported sixfold losses for the first quarter.

Author: Belinda Zhou   

Shares in Pinduoduo Inc. (Nasdaq: PDD) dropped 8 percent to $20.78 apiece Monday after the discounter platform reported sixfold losses for the first quarter.

Seen by some as a rival to e-commerce giant Alibaba Group Holding Ltd. (NYSE: BABA) in China's smaller cities, Pinduoduo said in a report today that its gross merchandise volume (GMV) for the 12 months through March soared 181 percent year-over-year to $83.1 billion. 

"It's driven by the rapid growth in our annual active buyer base and annual spending per active buyer," Zheng Huang, the chairman and chief executive officer of Pinduoduo, said in the statement. "These metrics reflect our success in increasing user engagement and improving user experience," he added.

Revenue in the first quarter increased by 228 percent to $667 million from a year ago, primarily driven by the company's surging online marketing services.

"We will continue to prioritize investments to pay long-term return such as sales and marketing and R&D at this early phase of our development to build a long lasting foundation," Huang said Monday in a call with analysts. "Our objective is not only to realize our near term goal of expanding and deepening the relationship with our 443 million and new active buyer base, but also to further strengthen our foundation to achieve our vision of new e-commerce."

The Shanghai-based e-commerce platform reported losses of $279.8 million, or 24 cents per American depositary share, for the first quarter, six times the loss reported in the same period of 2018.

Pinduoduo's research and development expenses skyrocketed 816 percent to $99.4 million. According to its statement, the increase was primarily due to an increase in the recruitment of R&D personnel and cloud services expenses.

"We are still very early in monetizing our platform and will continue to be mindful of balancing monetization and growth," Huang said.

Launched by the former Google engineer in 2015, Pinduoduo became a publicly traded company in July, raising a massive $1.6 billion in its initial public offering with backing from investors including Chinese tech giant Tencent Holdings Ltd. (HKEX: 0700). 

Soon after, the company was hit by multiple class action lawsuits on allegations that it sold counterfeit products and thereby reported misleading information to stockholders. Recently, the U.S. added Pinduoduo's e-commerce site to its list of "notorious markets" for violations of intellectual property rights.