Meituan reveals US$2.9 bil loss after filing for Hong Kong IPO

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(June 25): Meituan Dianping, the world’s fourth-most valuable startup, filed for an initial public offering in Hong Kong and revealed the scope of its losses for the first time.

While the company didn’t disclose how much it was planning to raise from the stock sale, it unveiled a net loss of 19 billion yuan (US$2.9 billion) last year on revenue of 33.9 billion yuan, according to its initial filing. After adjusting for share-based compensation and other items, the loss for the year was 2.9 billion yuan.

Meituan joins smartphone maker Xiaomi Corp in targeting an IPO in Hong Kong after the former British colony revised regulations to attract the major tech listings it’s lost out on in the past. The food delivery and restaurant reviews service was said to have been targeting a US$6 billion fundraising at a valuation of roughly US$60 billion, rivaling Xiaomi’s goal of as much as US$6.1 billion in what would be the world’s largest IPO in two years. Xiaomi is also unprofitable and lost more than US$1 billion in the first three months of 2018 alone.

Meituan’s debut is another signal of China’s rising technology might — a flashpoint for tensions with the U.S. A generation of up-and-comers like Meituan and ride-hailing giant Didi Chuxing are emerging to build out an internet industry long dominated by social media giant Tencent Holdings Ltd, e-commerce player Alibaba Group Holding Ltd and search engine operator Baidu Inc. Bloomberg News reported its filing and results Friday.

Meituan was most recently valued at US$30 billion, making it the world’s fourth most valuable startup according to CB Insights. The joint sponsors of the IPO are Goldman Sachs Group Inc, Morgan Stanley and Bank of America Merrill Lynch. China Renaissance is sole financial adviser, according to the filing.

Chief Executive Officer Wang Xing founded in 2010 as a group-buying site similar to Groupon Inc, before a 2015 merger with Dianping, which provided reviews of restaurants and other local businesses.

The combined company handled US$57 billion of transactions last year between more than 300 million annual active buyers — about the size of the American population — and more than four million merchants. It’s more recently expanded into areas such as ride-sharing, bikes and travel. With a few taps to navigate its smartphone apps, Chinese customers can order up hot meals, groceries, massages, haircuts and manicures at home or in the office.

An IPO would give Meituan additional capital to compete and expand. The company however faces formidable rivals in key businesses. It’s competing with entities backed by Alibaba in food delivery, with Didi Chuxing in ride hailing, and even with its own backer Tencent in payments. It also expanded into bike sharing with a deal for Mobike.

Meituan is also considered a prime candidate to eventually sell Chinese depositary shares, a government program to give more opportunities to domestic investors and stem a corporate exodus to overseas markets. Its other existing backers include Booking Holdings Inc, Sequoia Capital, Canada Pension Plan Investment Board, Trustbridge Partners, Tiger Global Management, Coatue Management and Singaporean sovereign wealth fund GIC.