Pinduoduo is the fastest growing e-commerce app in China. The startup’s growth is up to the point of a Pinduoduo IPO in NASDAQ with the company’s founder set to be one of China’s top 25 richest people. However, the company is difficult to IPO in Chinese exchange market due to government regulation and protection of intellectual property rights.
On that note, its plan to IPO in the US faces red flags. Pinduoduo has had reports of violations of intellectual property rights in the past. It had a number of issues about undermining business rules. It has also had reports of 248 Chinese companies suing the company. One of the issues that caused these companies to sue the platform is the prevalence of fake goods in the company.
Reports said more and more sex and violent products were found on Pinduoduo. Back to Pinduoduo app’s plan to IPO in NASDAQ, it has been making roadshows for investors recently. The startup is planning to sell around 85.6 million America Depository Shares at $16 to $19 each price range in an IPO.
Last April, Pinduoduo is in $15 billion valuations but has since increased to a range between $20 billion to $24 billion. The company following the footsteps of both JD.com and Alibaba, Chinese companies traded on U.S. stock exchanges. However, both companies were older when they IPO with JD.com being operational for 16 years while Alibaba had been operational for 15 years.
On the other hand, Pinduoduo has only been operating for three years. It is one of the many companies operating in the Chinese market with heavyweights such as Tencent and Alibaba. According to Colin Huang, Pinduoduo’s CEO, he wants his company to become somewhat of a combined “Costco + Disney”. He wants it to be a platform offering economical deals interspersed with entertainment.
To provide consumers with proper entertainment, investors and resources are required. To generate value for money, the company is selling private label brands. The shop offers highly discounted branded products. However, there were reports of unauthorized online shops selling unauthorized series of products in the platform.
Pinduoduo is a potential breeding ground for counterfeit products. This is because of the platform’s unsustainable business model. While it is great to have a place to buy extremely cheap items, the business could be a brand nightmare. They could destroy many companies that are legally operating. Whether it would be accepted by US investors is a huge question with tremendous market impact.
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