Caixin
Jun 29, 2021 05:58 PM
BUSINESS & TECH

Update: Chinese Online Grocer Dingdong’s Shares Close Flat in NYSE Debut

Online grocer Dingdong is expected to set the IPO’s final pricing on Monday night in the U.S. Photo: VCG
Online grocer Dingdong is expected to set the IPO’s final pricing on Monday night in the U.S. Photo: VCG

Shares of Chinese online grocer Dingdong Maicai closed flat in their debut Tuesday on the New York Stock Exchange after the company radically slashed the size of the initial public offering (IPO) and priced it at the bottom of an expected range.

The stock opened at $28 a share, up 19% from the IPO price of $23.50, and climbed as high as $29.99 before closing at $23.52. At the end of the day, the Chinese startup had a valuation of $5.5 billion, compared with the $5.1 billion valuation after an investment last month by SoftBank’s Vision Fund II.

Dingdong raised $95.7 million in the IPO, selling 4.07 million American depositary shares (ADSs). That was down 70% from the 14 million ADSs the company initially aimed to sell. The IPO was priced at the bottom of the expected range of $23.50–$25.50. The company also cut underwriters’ options for overallotment shares to about 611,000 from the 2.1 million shares previously planned.

Dingdong’s major downsizing came after shares of rival Missfresh Ltd. plunged in their first two days of trading. Tencent-backed Missfresh priced its ADSs at $13 only to see them fall as low as $8.20 on the first trading day last Friday before rebounding to close down nearly 26%. They continued to fall in the second trading day and ended Monday at $8.84 — down about a third from the IPO price. Missfresh’s shares declined a further 2% Tuesday.

The sell-off gave Missfresh a market value of about $2.1 billion. Dingdong, which is roughly twice the size of Missfresh based on revenue, originally targeted a $6 billion market capitalization. The pair are China’s two largest players in a crowded field of companies looking for profits in China’s vast online market for groceries.

“After the weak performance of the Missfresh IPO, it seems that investors’ appetite has certainly soured on the space,” said an analyst at a mid-sized brokerage, speaking on condition of anonymity under company policy. “Dingdong’s smaller deal size may well signal that the market needs more assurance that the company can really deliver on the growth story before investors are ready to stock up on their shares.”

Grocery apps exploded in popularity last year in China as the coronavirus-induced stay-at-home orders and other social distancing measures prompted consumers to turn to online grocery shopping.

Dingdong is fighting to consolidate its position as the leader in China’s highly competitive online grocery market. Dingdong overtook the older Missfresh last year. But both companies are still losing big money and recently have faced new challenges from bigger, better-funded rivals like e-commerce giants Alibaba, JD.com and Pinduoduo, as well as takeout dining giant Meituan.

All the companies are chasing a Chinese grocery market that was worth 11.9 trillion yuan ($1.8 trillion) in 2020 and is expected to grow to 15.7 trillion yuan by 2025, according to third-party market research cited in Missfresh’s IPO prospectus. The research notes that China’s grocery market is highly fragmented, with the top 10 players accounting for just 6.7% of all sales. The top 10 in the U.S. account for more than half of the market.

Based in China’s commercial capital of Shanghai, 4-year-old Dingdong operates in 29 cities across China. It suffered a net loss of 3.18 billion yuan ($491 million) last year, up 70% from 2019, as revenue nearly doubled to 11.34 billion yuan, according to the prospectus. Founded in 2014, Missfresh posted slower revenue growth of 2% in 2020, with the figure reaching 6.13 billion yuan that year. But its net loss narrowed by more than 40% to 1.65 billion yuan in 2020 from a 2.91 billion yuan loss in 2019.

Contact reporter Ding Yi (yiding@caixin.com) and editor Yang Ge (geyang@caixin.com)

Contact reporter Ding Yi (yiding@caixin.com) and editor Yang Ge (geyang@caixin.com)

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