Ex-Googler Becomes China’s 12th Richest Person
The former Google engineer’s $13.8 billion fortune after the IPO places him among the world’s 100 richest people.
(Bloomberg) -- Pinduoduo Inc. founder Colin Huang became China’s 12th richest person with the soaring U.S. trading debut of his e-commerce company.
The former Google engineer’s $13.8 billion fortune after the IPO places him among the world’s 100 richest people, according to the Bloomberg Billionaires Index. Huang, who started PDD, as the company is known, retains a 46.8 percent stake after the IPO, before any exercise of an over-allotment option.
PDD rose as much as 44 percent on its first day of trading in New York after raising $1.63 billion in the fourth-largest U.S. initial public offering this year. Its shares closed up 41 percent Thursday to $26.70, giving the company a market value of almost $30 billion. PDD had priced 85.6 million shares Wednesday at the top of the $16-to-$19 marketed range.
Huang, who started his career at Google’s headquarters in 2004 as a software engineer, returned to China in 2006 to help establish Google China. He started his first company in 2007, an e-commerce site called Ouku.com that he sold three years later. At PDD, his Shanghai-based firm won the backing of Sequoia Capital and social networking giant Tencent Holdings Ltd.
PDD’s listing was exceeded in the U.S. this year only by Axa SA’s U.S. unit at $3.2 billion, Pagseguro Digital Ltd. at $2.6 billion and iQiyi Inc. at $2.4 billion, according to data compiled by Bloomberg. ADT Inc., the fifth largest at $1.47 billion, is the only one of the top five with a U.S.-based parent.
Globally, Chinese companies accounted for 28 percent of the $114 billion raised by 951 companies in IPOs this year. They made up 17 percent of new share sales on U.S. exchanges.
PDD’s offering was led by Credit Suisse Group AG, Goldman Sachs Group Inc. and China International Capital Corp.
Friends Discount
Investors are watching PDD in light of volatility among recent Chinese tech debutantes. The company carved out a slice of the country’s massive e-commerce market by popularizing a format where people spot deals on products such as fruit, clothing and tissues, and then recruit friends to buy at a discount.
Besides a reputation for low prices, PDD has benefited from a large base of users in China’s poorer cities and rural areas. The three-year-old company acts as an online bazaar for independent merchants, handling 4.3 billion orders last year and $41.8 billion of transactions for the year ended June 30, it said in regulatory filings.
After switching from a direct-sales business model, PDD said it now generates revenue primarily from online marketplace services, taking in $278 million in 2017. In the first quarter of this year, its revenue rose 37-fold to $220.7 million. But its losses widened to almost $80 million last year, reflecting its increasing outlay on marketing.
Consumption Potential
“To drive eventual and long term profitability PDD must use the IPO capital to grow user numbers with the same rapid pace and sustain growth,” Eleanor Creagh, a market strategist with Saxo Bank, wrote in a note before trading began. “As lower-tier cities become larger and wealthier, they will inject further consumption potential into the economy.”
In April, PDD issued more than 250 million shares worth at least $1 billion, based on the IPO pricing, to a company controlled by Huang, according to a filing.
Huang, who grew up in Hangzhou and studied at Zhejiang University, got a master’s degree in computer science from the University of Wisconsin. He plans to donate some of his PDD shares to two charitable foundations that he intends to establish.
--With assistance from Alex Barinka, Pei Yi Mak and Yoojung Lee.
To contact Bloomberg News staff for this story: David Ramli in Beijing at dramli1@bloomberg.net
To contact the editors responsible for this story: Robert Fenner at rfenner@bloomberg.net, ;Elizabeth Fournier at efournier5@bloomberg.net, Michael Hytha
©2018 Bloomberg L.P.
With assistance from Editorial Board