China’s Meituan Dianping to start IPO offering today

“We cannot assure you that Mobike or our businesses as a whole will achieve profitability in the future.”

Chinese on-demand services behemoth Meituan-Dianping is moving a step closer to its September 20th public float in HKEX, which plans to raise over US$4 billion to ramp up its R&D efforts as well as to fund the company’s strategic investments and acquisitions.

After kicking off a series of pre-deal investor education (PDIE) roadshows in late-August and setting an indicative price range of HK$60 to HK$72 ($7.6-$9.2) per share for the IPO, Meituan announced on Thursday in Hong Kong that it’s starting the Hong Kong public offering from September 7th on and ends by the 12th.

The Hong Kong offering, which is part of the global offering, comprises of 24,013,500 Class B Shares, while the international offering part will comprise of 456,255,000 Class B Shares.

According to a statement from the Beijing-based startup, funds raised from the IPO will be used towards R&D, development of new products and services, investments and acquisition of other businesses, etc.

 – Around 35% (around HK$10,893 million) to upgrade the Company’s technology and enhance the Company’s research and development capabilities;

– 35% (HK$10,893 million) to develop new services and products;

– 20% (HK$6,225 million) to selectively pursue acquisitions or investments in assets and businesses which are complementary to the Company’s business and are in line with the Company’s strategies;

– 10% (HK$3,112 million) for working capital and general corporate purposes.

Amazon of services

Meituan often refers to itself as the “Amazon of services” in China, as one of the largest e-commerce platforms for services, the Beijing-based startup offers a wide range of offline services from its mobile app, including making restaurant reservation, buying movie tickets, booking hotels and ordering food deliveries, just to name a few.

However, its vision of becoming the metaphoric Amazon of services is to be fiercely challenged by Hangzhou-based e-commerce giant Alibaba, who already beat the real Amazon in the middle kingdom.

Meituan’s core businesses stretch very far, across a variety of areas with – to some – little or no direct links, from food delivery to travel booking, from short-rentals to bike-sharing, and more.

And the overstretching of its businesses, might be weighing on its profitability, as the company admitted in a recent filing.

We cannot assure you that Mobike or our businesses as a whole will achieve profitability in the future.

Chen Shaohui, the company’s CFO said at Thursday’s press conference Meituan’s financials have improved after going through quick-pace growth over the past few years, the company is still losing money more because of the company believes in the market’s potential and are still making a lot of investments. However, he did say that his firm is very confident in its food delivery business turning a profit without giving a specific timeframe.

Wang Puzhong, Meituan SVP, told press at the same conference that the company started to build up its very own instant delivery network since 2015 and has turned it to the largest of its kind in the world, with an averaged delivery time of fewer than 30 mins in most of the cities it operates.

Meituan-Dianping was incorporated as a result of the merger between both Beijing-based Meituan and Shanghai-based Dianping, both founded respectively in 2010 and 2003.

Meituan chose to join the 2018 tech IPO wave, according to people close to company, for a two-pronged reason: First, the Hong Kong Stock Exchange finally cleared a way for dual-class shares, and secondly, it needs to power up the war chest to fend off the attacks from Alibaba, which is creating a formidable challenger with the help of the latter’s long-term ally SoftBank.

No immediate plan for Southeast Asia

Meituan reportedly invested in Indonesian ride-hailing giant Go-Jek as well as Swiggy, one of the leading food delivery services in India.

However, the company’s co-founder and CEO, said that his company has no plans yet to expand aggressively across Southeast Asia, as the domestic market, with a population of 1.3 billion and a total of 8 million restaurants, is still rife with opportunities.

Editor: Ben Jiang