Meituan takes orders for US $4.4 bil IPO
But food delivery giant warns there is no certainty it would ever become profitable
HONG KONG: Meituan Dianping started taking orders for a Hong Kong initial public offering that could raise as much as US $4.4 bil as it warned there was no guarantee it would ever become profitable.
The restaurant review and delivery giant backed by Tencent Holdings Ltd is offering 480.27 million new Class B shares at HK$60 to HK$72 apiece, according to terms for the deal obtained by Bloomberg yesterday. Five cornerstone investors including Tencent have agreed to buy a combined US $1.5 bil of stock in the offering, the terms show.
Meituan’s IPO will bankroll its costly expansion into businesses from ride-hailing to finance as it pursues an ambition to become a super-app in the vein of Tencent’s own WeChat. That sets it up for a clash with Alibaba Group Holding Ltd, which is spending billions to try and seize control of China’s US$1.3 trillion food delivery and online services industry.
In ride-hailing, Meituan is taking on Didi Chuxing, the startup that defeated Uber Technologies Inc in China. Meituan’s IPO filings show a company growing rapidly but also hemorrhaging cash: it lost US $2.9 bil in 2017 on changes in the fair value of its pre- ferred stock. Even without the accounting adjustment, its operating loss last year was 3.8 billion yuan (US $557 mil).
The company released more details on its financial performance yesterday. In the four months ended April, revenue surged 95% to 15.8 billion yuan while its loss almost tripled to 22.8 billion yuan, which includes the impact of acquiring unprofitable bike sharing startup Mobike. “We cannot assure you that Mobike or our business as a whole will achieve profitability in the future,” it said in a filing.
Tencent has committed to buy US$400mil of stock in Meituan’s IPO, while Oppenheimer agreed to invest US$500mil, the terms show. Darsana Capital Partners will purchase US$200mil of shares, while fellow hedge fund Landsdowne Partners agreed to invest US$300mil. The China Structural Reform Fund committed to purchase US$100mil, the terms show.
Meituan expects to take investor orders through Sept 12 and price the offering that day during US Eastern hours. It aims to start trading on Sept 20, the terms show. Goldman Sachs Group Inc, Morgan Stanley and Bank of America Corp are joint sponsors of the offering, while China Renaissance Holdings Ltd.is sole financial adviser.
Chief executive officer Wang Xing founded Meituan.com 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. Wang will remain controlling shareholder after the company lists, according to Meituan’s preliminary prospectus.