China's Pinduoduo plans to raise more than US$1 billion in secondary offering

China’s upstart e-commerce company Pinduoduo and its shareholders filed to sell more than 50 million shares in a secondary offering that could raise about US$1.5 billion after the company’s public debut last year.

The Shanghai-based company plans to sell 37 million American depository shares, while investors market 14.8 million, according to a securities filing. Its shares closed at US$30.33 in US trading, then dipped after hours to about US$29. The lock-up period for PDD’s shares expired last month and the selling shareholders include Banyan Partners, Sequoia, Sun Vantage Investment and Lightspeed China.

PDD has seen revenue soar since its founding in 2015, challenging the conventional wisdom that e-commerce giants Alibaba Group Holding and JD.com had an unassailable lead in the market. Founder Colin Huang built the PDD app as a blend of commerce and entertainment, then aligned himself with Tencent Holdings by embedding his service into its WeChat messaging platform. Revenue grew an estimated five-fold in 2018 to about US$1.9 billion and are project to double this year to US$4.1 billion.

But this expansion is expensive. Operating losses are estimated to have been US$1.25 billion last year, according to data compiled by Bloomberg. The offering, from which PDD said it expects to receive US$1.1 billion or US$1.25 billion if underwriters exercise an option to purchase additional shares, will help fuel future growth.

PDD’s shares have climbed in recent weeks, allowing it to raise more money from a secondary offering. The stock had advanced 35 per cent this year through the most recent close.