Meituan unveils US$2.9bn loss as it prepares investors for long-term in Hong Kong IPO filing

The listing is likely to be the city’s second multibillion-dollar listing by a tech company following smartphone vendor Xiaomi

PUBLISHED : Monday, 25 June, 2018, 11:57am
UPDATED : Monday, 25 June, 2018, 10:28pm

Meituan Dianping, China’s biggest platform for on-demand services, cautioned investors that it may remain loss-making for some time in a filing for an initial public offering in Hong Kong on Monday, saying it was focused on “thinking long-term” and expanding its customer base.

Meituan, which unveiled a net loss of 19 billion yuan (US$2.9 billion) last year or 2.9 billion yuan excluding share-based compensation and other one-time factors in the filing, is expected to float in the third quarter. The company is seeking to raise US$6 billion at a valuation of about US$60 billion, according to a Bloomberg report.

“Consistent with our operating philosophy of thinking long-term and seizing strategic business opportunities, we may take actions that fail to generate short-term profitability,” the Beijing-based company pointed out under the risk section in the filing. “Our efforts are focused on expanding our customer base, satisfying unmet customer needs and enhancing our network, rather than prioritising monetisation now.”

The listing is likely to be the city’s second multibillion-dollar listing by a tech company following smartphone vendor Xiaomi, which is expected to float in early July. Meituan expects to use the IPO funds to upgrade its technology, develop new services and products and pursue investments in businesses that are complementary to current strategies, according to the filing.

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Founded in 2010 by Wang Xing, a Tsinghua University alumnus, Meituan says it is on a mission to make people “eat better and live better”. Meituan started as a Groupon like group-buying site before merging with rival Dianping in 2015 to create China’s largest lifestyle platform business.

Meituan launched food delivery services in 2013 and expanded into the ride-hailing business in December 2017 after 10 months of soft operations in Nanjing. In April it acquired one of China’s two leading bike-sharing start-ups, Mobike, for US$2.7 billion, ramping up its strength in China’s transport market. It is also a go-to-destination in the world’s most populous nation for booking movie tickets, hotels, travel packages and errand services.

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Meituan says it has about 531,000 daily active delivery riders and generated over 5.8 billion transactions worth 357 billion yuan in 2017. The company says it has a user base of 310 million and an active merchants base of 4.4 million across cities and counties in China.

The company was valued at US$30 billion in the latest round of financing led by Tencent Holdings last October, making it the fourth most valuable start-up globally, according to CB Insights.

China Renaissance Group, an investment bank that was behind a slew of high-profile Chinese tech deals including the Meituan-Dianping merger, also filed IPO application to the Hong Kong stock exchange on Monday.

The company, led by one of China’s most famed rainmakers Bao Fan - known for his role behind several mergers among Chinese technology giants such as Didi-Kuaidi and Meituan-Dianping - had advised 700 transactions valued at over US$100 billion since its establishment in 2005, according to a stock filing.

Beijing-based China Renaissance plans to raise between US$600 million and US$800 million, Reuters reported earlier, citing unnamed sources.

The bank’s revenue reached US$139 million in 2017 while its net profit was only US$32,000, according to the filing. Its first-quarter loss widened to US$65 million from US$1 million in the same period last year, China Renaissance said.

With additional reporting by Li Tao in Shenzhen