On August 26, the Chinese e-commerce platform Pinduoduo saw its stock price on the U.S. stock market drop by over 30%, falling below $100 per share, its lowest value since 2024.
This drop in Pinduoduo’s stock price is believed to be a result of its second-quarter performance falling below market expectations. The company reported revenue of 97.06 billion yuan in the second quarter, with adjusted operating profit of 34.99 billion yuan and adjusted net profit attributable to ordinary shareholders of 34.43 billion yuan. However, market expectations for Pinduoduo’s revenue were 99.985 billion yuan.
The slowing growth of Pinduoduo’s total revenue was largely attributed to a slowdown in the growth of transaction service revenue. In the quarter, transaction service revenue reached 47.944 billion yuan, a 234% year-on-year increase, accounting for 49.4% of total revenue, which was a decrease of 1.69 percentage points from the previous quarter. In the three preceding quarters, the growth rates of transaction service revenue were 315%, 357%, and 327%, respectively.
The main contribution to the growth of transaction service revenue came from the rapid expansion of Temu, Pinduoduo’s overseas platform. However, in the second quarter, the growth rate of online marketing services and other revenue slowed to 29%, compared to 39%, 57%, and 56% in the previous three quarters.
On August 15, attorneys general from 21 U.S. states jointly wrote to demand answers from Temu within 30 days regarding data collection from U.S. consumers and its relationship with the Chinese government.
Following the release of the financial report on August 26, Pinduoduo’s Chairman and Co-CEO, Chen Lei, expressed during a conference call that the company’s global business is facing intense competition and significant uncertainties due to constantly evolving external events. Chen stated that the combined impact of these factors inevitably resulted in business fluctuations, showing unstable revenue growth and declining profitability trends in the quarter. He emphasized that the intensified competitive environment is a prevailing theme in the e-commerce industry, and sustainable high revenue growth is not feasible.
Moreover, since the fourth quarter of 2023, Temu has faced multiple incidents of merchants seeking redress at their offices due to dissatisfaction with Pinduoduo’s hefty fines. In July 2024, merchants gathered twice to protest, with the second protest on July 29 seeing an increase in the number of protesting merchants, reaching seven to eight hundred people who even entered Temu’s office on the 25th floor.
On the day of the financial report release on August 26, merchants once again gathered to protest outside Temu’s office in Guangzhou.
In March 2024, Temu issued a large number of fine lists, mainly related to “after-sales issues,” without explaining the specific problems in each case. The penalties ranged from withholding payment to a compensation fee of five times the declared value of the goods.