E-commerce newcomer Pinduoduo hopes to raise $1 billion

(IMAGE: SHUTTERSTOCK)

Chinese e-commerce newcomer Pinduoduo (NASDAQ: PDD) seeks to finance an operational expansion by raising $1 billion. The company’s filing with the SEC said that it plans to sell 37 million shares to raise necessary capital.

Founded in 2015, PDD sets itself apart from competing e-commerce firms by offering discounts to shoppers who buy products as a group. The company said it has over 300 million active buyers and over one million merchants. The company also said that its group business model attracts more female customers.

The company said in its press release that proceeds from the sale of shares will be used to “enhance and expand its business operations, research and development, potential strategic investments and acquisitions.”

The $1 billion capital goal is planned to help Pinduoduo grow to rival Chinese e-commerce giants JD.com (NASDAQ: JD), Alibaba (NYSE: BABA) and Tencent (OTC US: TCEHY).

However, according to TechCrunch, Pinduoduo is not a profitable enterprise. Since going public in July 2018, the company endured a net loss of nearly $1 billion in its second quarter and over $150 million in its fourth quarter. While revenue increased by 697 percent year-over-year to almost $500 million in the company’s fourth quarter, operating losses increased five-fold.

Pinduoduo’s leadership is appealing to investors to believe in the company’s potential and assist in the sales round.

“It is not easy to take the leap of faith believing in such an unconventional company, which strives to meet both economic and social needs of users, and to make a positive impact to the society,” said Pinduoduo founder Colin Huang in a letter to investors. “The pursuit and focus of our long-term vision and intrinsic value may not always translate into near-term profits. Instead, we hope to show you the true colors of our company no matter how bumpy or rough the numbers may seem to be.”