Pinduoduo, the China-based group buying platform backed by internet group Tencent, will raise approximately $1.63bn when it floats in the US today.
The company is set to price the initial public offering at the top of its $16 to $19 range, and will issue 85.6 million American depositary shares (ADSs) on the Nasdaq Global Select Market. It values Pinduoduo at $23.8bn including all outstanding share options, according to Reuters.
The IPO was oversubscribed 20-fold and the buyers included Fidelity Investments and Abu Dhabi-owned sovereign wealth funds, a person close to the company told Caixin, adding that Pinduoduo could have priced the IPO at $22.80 if it had chosen.
Tencent and another Pinduoduo investor, venture capital firm Sequoia Capital, had each indicated interest in buying $250m of shares in the offering but have not confirmed those purchases.
Pinduoduo’s group buying platform enables multiple buyers to form groups, either on the platform itself or through social media networks, to buy items in bulk at discounted rates. It made an $83.7m net loss in 2017 from $278m in revenue, and has more than 343 million active users.
The company intends to spend $580m of the proceeds from the offering to expand its business, with the same amount set to go to research and development. It had raised $1.7bn in funding according to the IPO filing.
Gaorong Capital, the private equity firm then known as Banyan Partners, VC group IDG Capital and VC firm Lightspeed Venture Partners provided Pinduoduo’s early funding, before Tencent invested $4.4m in funding in early 2016.
Cathay Capital’s FPCI Sino-French (Innovation) Fund and investment vehicles Sun Vantage Investment and Sky Royal Trading supplied $50m for the company the same year, the former joining Tencent, Gaorong and Sequoia China to add $113m in February 2017.
Tencent invested a further $100m in Pinduoduo in June 2017 and $989m in a $1.37bn round in March 2018 that included Sequoia and Gaorong.
Pinduoduo’s largest investor is Tencent, whose 18.5% stake will be diluted to 17% if it declines to buy the additional shares, followed by Gaorong (9.3% post-IPO) and Sequoia China (6.8%). Its largest shareholder remains founder, chairman and CEO Zheng Huang (46.8%).
Joint bookrunners Credit Suisse, Goldman Sachs, CICC and China Renaissance have a 30-day option to buy just over 12.8 million more ADSs, lifting the size of the offering to approximately $1.87bn.
– This article was amended on July 26, 2018 to reflect the details of the over-allotment option and the precise size of the offering.