Chinese e-commerce giant Pinduoduo had managed to raise $1.1 billion in new capital through a recently concluded private share placement. The company conducted the funding round to support its planned expansion despite the ongoing market volatility caused by the global pandemic.
According to a press release published on Tuesday, the private share placement had involved the issuance of Class A ordinary shares representing about 2.8 percent of the company's total outstanding shares. The company expects to get additional funding from "certain long-term investors" by early April. Pinduoduo did not name the investors in its press release.
The health and economic effects of the ongoing viral pandemic has raised the volatility of global markets as supply chains and business activities continue to be negatively affected. Despite this fact, Pinduoduo mentioned in its statement that the uncertainties have presented some attractive opportunities.
The company's vice-president of strategy, David Liu, mentioned in a statement that the additional funding should allow Pinduoduo to capture existing opportunities that will benefit its users. This will include the enhancement of its interactive experiences such as its live-streaming services and other digital products.
Through the added investments Pinduoduo hopes to provide a wider variety of value-for-money products to its existing users. The move mirrors similar strategies implemented by the company, which had included deep discounts for generic products for customers that purchase in groups or bulk. While some Chinese cities have already lifted travel restrictions and stay-at-home orders, a vast majority of people are still choosing to stay and shop from home for their basic needs.
Pinduoduo is currently China's third-largest e-commerce company, right behind Alibaba and JD.com. The Shanghai-based company has been ramping up its efforts to secure a larger market share. For its fourth quarter last year, Pinduoduo revealed that it had seen a 77 percent year-on-year increase in its user base, hitting a total of around 481.5 million monthly active users.
In its statement on Tuesday, Pinduoduo stated that it is currently in a strong cash position thanks to its positive operating cash flow over the past few years. Last year, the company reported net cash on hand amounting to over 34.9 billion yuan with a net operations cash flow of around 14.8 billion yuan. According to the company, its cash flow from its operating activities nearly doubled last year when compared to 2018.
For its December quarter, Pinduoduo stated that it has managed to narrow its losses to only 1.7 billion yuan, a significant reduction from the 2.4 billion yuan loss it reported over the same period a year earlier. Total revenues for its fourth-quarter had surged by 91 percent to 10.8 billion yuan, a 5.6 billion yuan increase from its revenues over the same period a year earlier.
