A driver packs delivery orders into the trunk of an electric motorcycle in front of a Missfresh warehouse.
Gilles Sabrie | Bloomberg | Getty Images
GUANGZHOU, China – Two Chinese grocery delivery startups – Missfresh and Dingdong – had uninspiring beginnings after going public in the US
Investors are concerned about cutthroat competition in the Chinese market for grocery deliveries and whether these companies will ever become profitable.
Missfresh, which is backed by Chinese tech giant Tencent, went public on the Nasdaq on Friday, costing its American Depositary Shares (ADS) at $ 13 each and bringing in around $ 273 million. Since then, stocks have fallen a third, closing Tuesday at $ 8.65.
Meanwhile, rival Dingdong, which traded on the New York Stock Exchange on Tuesday, closed roughly unchanged on its debut after pricing its shares at $ 23.50 per ADS.
After Missfresh’s tough start, Dingdong reduced the size of its initial public offering from $ 357 million to $ 110 million, provided the syndicate banks fully exercise their option to purchase additional shares.
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Both e-commerce players are trying to take advantage of the growing trends in China – including the shift to online shopping, the demand for high-quality products and the digitization of supply chains.
However, Missfresh and Dingdong encounter some of China’s biggest giants such as Alibaba and JD.com, as well as grocery supplier Meituan. These companies have strong logistics and supply chains.
And competition is expensive.
“Both MF (Missfresh) and DDL (Dingdong) are still far from breakeven,” Kevin Xiang, an analyst at 86Research, told CNBC. “We think that their business models cannot generate a nationwide positive uniform economy.”
Missfresh reported a net loss of 610.3 million yuan ($ 93.2 million) in the first quarter of 2021, much higher than its net loss of 194.7 million yuan for the same period in 2020. The company was also never positive in cash flow .
Dingdong recorded a net loss of 1.38 billion yuan ($ 211.4 million) for the three months ended March 31, 2021. That was more than the net loss of 244.5 million yuan over the same period in 2020.
The losses and the ongoing operating costs have worried analysts.
“Despite the IPO funding, MF and DDL may run out of liquidity by the end of this year,” said Xiang. “The rate of money burning is faster than the improvement of the piece economy.”
In an interview with CNBC’s Eunice Yoon on Tuesday, Dingdong founder Liang Changlin said the company raised $ 1.3 billion earlier this year, so the money raised from the IPO was “not that important.” .
“We have sufficient cash flow and that is our situation,” said Liang.