Chinese eCommerce platform Pinduoduo plans to raise up to $5.6 billion to invest in its one-day delivery service of farm goods across China, among other projects.
The company plans to offer up to 25.3 million American depositary receipts, which would garner roughly $3.6 billion based on Monday’s closing stock price. Pinduoduo also seeks to raise up to $2 billion from a convertible bond offering, according to the Financial Times.
In a statement released on Tuesday (Nov. 16), Pinduoduo said it will use the money “to invest in agricultural logistics infrastructure and responsive manufacturing as consumer behavioral changes accelerate the online migration of retail.”
Pinduoduo added that demand for online grocery shopping in China has surged since the COVID-19 lockdowns. As most Chinese consumers tend to shop daily for groceries, online grocery shopping has become an increasingly attractive investment for internet companies in the region.
Online grocery shopping has likewise seen a surge in demand in other countries since the pandemic, particularly in the U.S.
But a China-based analyst told the Financial Times that while the Chinese were frequent shoppers of agricultural goods, which would help boost Pinduoduo’s user numbers, the business was low-margin.
Pinduoduo’s current service connects merchants to buyers. The platform has approximately 731 million annual users, compared with 757 million for Alibaba, China’s largest shopping platform, according to the FT.
Despite being one of China’s largest shopping platforms, Pinduoduo has yet to turn a profit. Last week, the company reported a third-quarter net loss of $115.6 million.
In March, Pinduoduo said it raised $1.1 billion from newly issued Class A shares in a private placement. The transaction represented about 2.8 percent of the Shanghai-based technology company’s total outstanding shares. Pinduoduo said it would use the money to finance growth, upgrade its shopping experience for users and offer more products.