O2O

Auto Added by WPeMatico

Meituan-Dianping’s IPO off to a good start as shares climb 7% on debut

Meituan-Dianping (3690.HK) enjoyed a strong debut today in Hong Kong, a sign that investors are confident in the Tencent-backed company’s prospects despite its cash-burning growth strategy, heavy competition and a sluggish Hong Kong stock market.

During morning trading, Meituan’s shares reached a high of HKD$73.85 (about $9.41), a 7% increase over its initial public offering price of HKD$69. When Meituan reportedly set a target valuation of $55 billion for its debut, it triggered concerns that the company, which bills itself a “one-stop super app” for everything from food delivery to ticket bookings, as overconfident.

While Meituan, the owner of Mobile, is the leading online marketplace for services in China, it faces formidable competition from Alibaba’s Ele.me and operating on tight margins and heavy losses as it spends money on marketing and user acquisition costs. As it prepared for its IPO, Meituan was also under the shadow of underwhelming Hong Kong debuts by Xiaomi and China Tower. Like Xiaomi, Meituan is listed under a new dual-class share structure designed to attract tech companies by allowing them to give weighted voting rights to founders.

The sponsors of Meituan’s IPO are Bank of America Merrill Lynch, Goldman Sachs and Morgan Stanley.

Alibaba to buy all remaining outstanding shares of local delivery service Ele.me

As expected since February, Alibaba will buy all outstanding shares of Ele.me that it doesn’t already own. Best-known for food deliveries, Ele.me claims to be China’s biggest online delivery and local services platform. In an announcement, Alibaba said the deal values Ele.me at $9.5 billion. Alibaba, which first invested in Ele.me two years ago, and its affiliate Ant Small and Micro Financial Services Group currently hold about 43% of the company’s outstanding voting shares.

This is the latest in a string of investments and acquisitions by Alibaba to expand its physical retail presence as part of its so-called “new retail” strategy to combine e-commerce and offline retail. The company’s goal is to make it easier for users to move (and spend money) between brick-and-mortar stores and Alibaba businesses like Tmall and Taobao. For example, they may view products at pop-up stores and then order them on their smartphones for almost-immediate home delivery.

Ele.me, which will continue to operate under its own brand, is at its heart a logistics technology company. Founded in 2008, it utilizes its logistics system to provide services like Fengniao, an express courier for local deliveries. After the deal is finalized, Alibaba said that founder and chief executive officer Zhang Zhuhao (also known as Mark Zhang) will become chairman of Ele.me and special advisor to Alibaba Group CEO Daniel Zhang on its new retail strategy. Wang Lei, currently vice president of Alibaba Group, will take over as Ele.me’s CEO.

In a press release, Zhang said “Under the leadership of its founder and management team, Ele.me has achieved leading market share in China’s online food delivery and local services sector. Our shared belief that New Retail will create more value for customers and merchants has brought us together. Looking forward, Ele.me can leverage Alibaba’s infrastructure in commerce and
find new synergies with Alibaba’s diverse businesses to add further momentum to the New Retail initiative.”

Bloomberg reported at the end of February that Alibaba planned to buy the rest of Ele.me’s shares from its other investors, including Baidu.

The deal deepens Alibaba’s competition with Tencent, in particular its own local services and delivery platform, Meituan Dianping, which was formed by a merger in 2015. Alibaba previously owned shares in Meituan Dianping, thanks to its investment in Meituan, but began offloading them soon after the merger with Dianping.

In a statement, Alibaba said Ele.me complements its affiliate Koubei, a platform that gives restaurants and stores a way to go online and reach more local customers.

“By combining Ele.me’s online home delivery services with Koubei’s consumer acquisition and engagement capability for a range of restaurants and service establishments, Alibaba will be able to offer an integrated experiences to customers both online and offline,” said the company.