“Finance” New Media Shu Zhijuan/Ven Pansi/Editor
Daily Youxian’s breakout made Dingdong Maicai’s listing full of apprehension. On the eve of listing, Dingdong Maicai slashed the IPO fundraising scale, reducing the originally scheduled 14 million ADS to 3.7 million ADS, and financing at most 94.4 million US dollars, down 74% from the previously planned financing of 357 million US dollars, equivalent to nearly a quarter of the previous amount.
Despite the substantial reduction in the scale of financing, Dingdong Maicai still experienced an intraday break on the first day of listing. On the evening of June 29, Dingdong Maicai (DDL: NYSE) was listed on the New York Stock Exchange, with an issue price of US$23.5 per share. The stock opened at 28 US dollars per share, after which it fell below the issue price at one time. As of the close, it closed at 23.7 U.S. dollars, with a market value of 5.586 billion U.S. dollars.
The industry generally believes that the reason why Dingdong Maicai will not break seriously on the first day of listing is because the financing scale has been reduced by 70%, and sooner or later, fixed increase or allotment will be required in the future. From the perspective of industrial development, fresh food e-commerce is actually a beautiful, but in fact, very difficult track. The weight of the money-burning model is always on top of Dingdong’s grocery shopping. Listing does not mean going ashore. When to get rid of the profit dilemma and how to break through in the Red Sea market are issues that Dingdong buys urgently need to solve.
The amount of financing has been significantly reduced by more than 70%
Dingdong Maicai officially landed on the New York Stock Exchange on Tuesday, Eastern Time. It opened at US$28 per share that day, a 19.1% increase from the previous IPO price of US$23.5. Subsequently, the gains narrowed, and the price fell all the way in the late trading hours, once fell below the issue price, and finally reported at 23.7 US dollars per share.
In fact, the result of Dingdong Maicai’s break in the first day of listing was in line with market expectations. On the one hand, Dingdong Shopping has been in a state of substantial losses. The prospectus shows that in 2019, Dingdong Maicai had a net loss of 1.87 billion yuan; a net loss of 3.177 billion yuan in 2020, an increase of 69.6% year-on-year; in the first quarter of 2021, a net loss of 1.385 billion yuan, an increase of 466.4% year-on-year. At the same time, from 2019 to the first quarter of this year, the net cash value of Dingdong’s grocery shopping activities was 964 million yuan, 2.056 billion yuan and -10.15 billion yuan, all of which were negative.
On the other hand, Dingdong’s “magic weapon” for buying food has been questioned, and its internal potential flaws have gradually been exposed. Because the pre-warehouse model lies in the asset-heavy and operational model, in addition, the lack of offline stores leads to scarce offline traffic, and the need to reinvest in subsidies to obtain customers, which puts a test on the profitability of the company.
It is worth noting that Dingdong Maicai reduced the size of its IPO on the eve of its listing. In its initial filing of the prospectus, it planned to issue 14 million American Depositary Shares (ADS), which was later changed to 3.702 million American Depositary Shares (ADS). Based on this calculation, the scale of Dingdong Maicai’s stock issuance has been reduced by 73.5%.
In response, Liang Changlin, the founder and CEO of Dingdong Maicai, responded that the company is not so urgent to get money from the secondary market. The D and D+ rounds raised US$1.03 billion, and the cash flow is abundant. How much money needs to be raised in the secondary market will affect the company. The language is very flexible. “If the market is particularly good, and price and value can be linked, Dingdong buys more food; the market is not good, and the price is lower than the value it should be, then less financing. The purpose of listing is not to collect money.”
However, in the view of Shen Meng, executive director of Chanson Capital, the reduction of the fundraising scale of Dingdong Maicai may be related to the poor response of the market, it is difficult to raise enough funds, or the financing cost has become higher. At the same time, reducing the amount of funds raised on the eve of the listing can prevent the stock price from breaking seriously at the time of listing, but sooner or later, fixed increase or allotment will be required in the future.
Jiang Han, a senior researcher at Pangu Think Tank, believes that from the perspective of industrial development, fresh food e-commerce is actually a beautiful-looking, but actually very difficult track. The most important reason on this track is that the extremely high cost base of fresh food e-commerce determines that the development of the platform requires a lot of investment.
Community group buying competition intensifies, what is the prospect of burning money for traffic?
Although the listing means a new beginning, in the face of the surging community group buying, Dingdong Shopping seems to have to think about where the next “war” will go?
From the second half of 2020 to the beginning of 2021, the community group buying track can be described as turbulent. In addition to Meituan, Didi’s Meituan Optimal, Orange Heart Optimal, and Pinduoduo’s Dodo Shopping, many old players and new players are also constantly emerging in this red sea. On October 31, 2020, “Hema Optimal” went online in Wuhan, opening 10,000 groups. Two months later, the small program “Jing Xi Pin Pin”, a community group buying platform under JD.com, was officially launched, led by Liu Qiangdong himself.
In addition, many express companies are laying out the community group buying track. Beginning in 2021, SF Express has launched two community group buying products, “Fenghutai” and “Chao Xianchu”. The former focuses on mid-to-high-end products and is currently offline, while the latter operates low-key in Shenzhen. At the same time, YTO Express also launched the community group purchase product “Chicken Optimal” in Hengshui, Hebei, with YTO’s “Mom Station” as the pick-up point; Shentong Express also cooperated with Hema in Hubei and Hunan in March this year. Community group purchase grid warehouse business.
More importantly, fresh food e-commerce is a very money-burning industry. Not only is it difficult to make a profit in the short term, it may also face the risk of bankruptcy once there is no capital injection. In 2019, the fresh food e-commerce industry suffered a “big earthquake”, and many companies fell in that winter: On November 22 of that year, Daradish announced that its poor management caused the capital chain to break; in December, all 80 stores of Miao Life were closed; In December of the same year, Jijixian announced that the company’s financing had failed and its profit fell short of expectations. It carried out large-scale layoffs and closed warehouses. Even Yiguo Fresh, which had received capital blessings from Ali, KKR and other institutions, could not survive this cold winter. Difficult bankruptcy and reorganization.
When talking about the barriers to competition in Dingdong’s grocery shopping, Liang Changlin said that China is a particularly large market, and the market for fresh food may be tens of trillions to 20 trillion, and it is still growing. No single company can satisfy everyone. “Different people and different scenarios have different needs for everyone.”
Chen Hudong, a special researcher of the E-commerce Research Center of the Net Economics, believes that because fresh food is a money-burning industry, and fresh food has very high requirements for timeliness, back-end supply chain matching, and regionality, this industry is The overall competition is fierce, but an efficient business model has not yet been formed, and there are many problems to be solved.
Han Rui, a partner of Gaorong Capital, believes that the fresh food industry will coexist with multiple formats in the future, and the remaining players need to achieve a certain point to the extreme. In a market that meets the immediate needs of first- and second-tier cities, “fast” will become an increasingly important and mainstream element.
In Jiang Han’s view, in the current relatively low limelight, fresh food e-commerce companies want to burn money in exchange for traffic as before, so as to support their rapid expansion, it is becoming more and more difficult. Although the epidemic has brought opportunities to e-commerce companies, there is huge market pressure for fresh food e-commerce companies.Return to Sohu to see more
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