Chinese e-commerce platform Pinduoduo has successfully raised US$1.1 billion in a private funding round.

WHO: Pinduoduo, founded by a former Google engineer, is a mix of social buying and heavily discounted products popular in lower-tier cities and rural areas that make up 73% of China’s population. The platform is China’s third-largest e-commerce company after Alibaba.

WHY: The company said it plans to use the funding to help finance growth, upgrade users’ shopping experience, and offer more subsidized products.

IN THEIR OWN WORDS: “Pinduoduo surpassed RMB1 trillion [$140.9 billion] in annual gross merchandise value (GMV) in less than five years,” Pinduoduo VP of strategy David Liu said in a statement. “We are confident that we will see robust growth beyond our current 585 million user base. The extra funding gives us the strategic flexibility to capture opportunities to further benefit our users, as we bring interactive experiences, such as our new live-streaming features, and wider variety of value-for-money products to them.”

DETAILS:

• Pinduoduo will issue new Class A ordinary shares representing about 2.8 per cent of its total outstanding shares to certain long-term investors.
• According to Reuters Pinduoduo secured several long-term investors including Chinese private equity firms Hillhouse Capital and Boyu Capital and tech giant Tencent Holdings for the deal.
• The company said its user base grew in the fourth quarter of last year with a 77% year-on-year increase to 481.5 million monthly active users.
• In 2019, 585.2 million users placed orders on Pinduoduo’s platform.
• In a statement, Pinduoduo said it had a “strong cash position,” with a positive operating cash flow for the past few years. As of the end of 2019, its net cash on hand amounted to 34.9 billion yuan (US$4.9 billion) and its net cash flow from operating activities was 14.8 billion yuan, almost double what it had at the end of 2018.
• Nasdaq-traded Pinduoduo is not profitable, although its net loss narrowed to 1.7 billion yuan in the December quarter compared with 2.4 billion yuan in the same period in 2018.
• This funding comes just six months after Pinduoduo raised $1 billion in a convertible bond. In February last year, it also raised $1 billion from a follow-on offering.