Sunday, February 17, 2019

Give This Unicorn A Miss!

As per divestopedia, in the venture capital industry, a unicorn refers to any tech startup company that reaches a $1 billion dollar market value as determined by private or public investment.

In July 2018, this Unicorn had raised US$1.6 Billion in the US Stock Market.

The company is no other than, Pinduoduo, the company that intends to rival Alibaba and JD.com. You can read all about this company in this report.


If you had watched China Variety Shows, you will not have missed out their advertisement. It has a very catchy song for its advertisement and always seem to be the main sponsor for some of the variety shows.

So why do I intend to give it a miss?

The main reason is because, on Feb 2019, the company has decided to raised another US$1.5 billion.

So after 7 months of raising US$1.6 Billion, it wants to raise another US$1.5 Billion!

Furthermore, as quoted from Straits Times Article:

"...it intends to issue some 37 million new shares while stockholders sell about 14.8 million..."

"...The new funds would be used "to enhance and expand its business operations... including potential strategic investments and acquisitions", the firm said in the statement, without giving details...".

"...In the third quarter of 2018, it had a turnover of US$491 million but has struggled to be profitable, recording a loss of US$160 million in the same period..."

In Short

My main reason for not investing in the company was simply because of the subsequent fund raising in such a short period and the losses it continues to make. It also seems like an exit strategy for some of the existing shareholders.

Anyway, I must confessed my decision maybe wrong since I did not do a detailed analysis on Pinduoduo. In the long term, it may turned out to be a right decision. I just do not know how "LONG" it will take.

Finally, I have learnt to ignore IPOs listing overseas or within Singapore. This is because we are uncertain if the companies is able to remain profitable in the long term. In addition, I also have to state that "the bigger the story, the more careful we have about the company".

If you are interested in investing in the US or Hongkong stock markets, do read and sign up on my newly designed course - Take AIM!

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