IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

Arun has over 15 years’ experience covering the Technology sector. During this time, he has worked with technology start-ups and as an equity analyst in investment banks and independent research firms. He was formerly a Technology Analyst for Canaccord Genuity, Altium Securities, Espirito Santo Investment Bank, Noble Group and Clear Capital. He has a dual Master’s degree in Financial Engineering and Industrial and Operations Engineering from the University of Michigan. He obtained his Bachelor’s degree in Mechanical Engineering from the Indian Institute of Technology, Bombay. He is also a CFA charterholder.

IPOs and Catalysts/Events

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Global Equity Research Ltd

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<a href="https://www.smartkarma.com/entities/dingdong-maicai" target="_blank" data-smartkarma-citation="entities:33461:1" rel="noopener">Dingdong Maicai (DDL US)</a> is an online grocery platform in China. The Dingdong Fresh mobile app and mini-programs enable Chinese consumer to shop online for groceries and other products. Dingdong notes that its market share in the on-demand e-commerce industry as measured by GMV (gross merchandise value) was 10.1% in 2020, according to CIC.Dingdong is backed by Shunwei China Internet Fund V (5.7% of outstanding shares), General Atlantic (5.6%), SoftBank Vision Fund (5.6%), CMC Capital (5.3%) and DST Asia (5.1%). Dingdong has filed for an NYSE IPO to raise $500 million, according to press reports. We also note that peer, <a href="https://www.smartkarma.com/entities/missfresh-limited" target="_blank" data-smartkarma-citation="entities:33468:1" rel="noopener">Missfresh (MF US)</a>, has also filed for a Nasdaq IPO to raise $500 million, according to press reports. We discussed this in <a href="https://www.smartkarma.com/insights/missfresh-ipo-initiation-no-so-fresh" target="_blank" data-smartkarma-citation="insights:53139" rel="noopener">Missfresh IPO Initiation: No so Fresh</a>. WM Tech has also filed for an HKEx IPO to raise potentially $1 billion, according to press reports. We discussed this in <a href="https://www.smartkarma.com/insights/wm-tech-ipo-initiation-food-for-thought" target="_blank" data-smartkarma-citation="insights:49914" rel="noopener">WM Tech IPO Initiation: Food for Thought</a>. The current frenzy around the online grocery delivery market in China is reminiscent of the bike-sharing frenzy a few years. The promises of a sizeable addressable market opportunity have resulted in significant sums being raised by specialists (such as Dingdong and Missfresh), tech goliaths (<a href="https://www.smartkarma.com/entities/pinduoduo-inc" target="_blank" data-smartkarma-citation="entities:27250:1" rel="noopener">Pinduoduo (PDD US)</a> and <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>) and traditional offline stores (such as <a href="https://www.smartkarma.com/entities/wm-tech-corporation" target="_blank" data-smartkarma-citation="entities:32976:1" rel="noopener">WM Tech Corporation (WMT HK)</a>) for their respective online grocery platforms. The resulting arms race has led to these players reporting heavy losses for their online grocery segments in the quest to grab market share. <div class="content-highlight">It is unclear if Dingdong (and Missfresh) has a sustainable competitive advantage to emerge as one of the winners. The online grocery delivery market is set for a shakeout which means that like bike-sharing, it will result in significant shareholder value destruction. Overall, we would pass on the IPO and wait on the sidelines to see how this plays out.</div>

Dingdong Maicai (DDL US) is an online grocery platform in China. The Dingdong Fresh mobile app and mini-programs enable Chinese consumer to shop online for groceries and other products. Dingdong notes that its market share in the on-demand e-commerce industry as measured by GMV (gross merchandise value) was 10.1% in 2020, according to CIC.Dingdong is backed by Shunwei China Internet Fund V (5.7% of outstanding shares), General Atlantic (5.6%), SoftBank Vision Fund (5.6%), CMC Capital (5.3%) and DST Asia (5.1%). Dingdong has filed for an NYSE IPO to raise $500 million, according to press reports. We also note that peer, Missfresh (MF US), has also filed for a Nasdaq IPO to raise $500 million, according to press reports. We discussed this in Missfresh IPO Initiation: No so Fresh. WM Tech has also filed for an HKEx IPO to raise potentially $1 billion, according to press reports. We discussed this in WM Tech IPO Initiation: Food for Thought. The current frenzy around the online grocery delivery market in China is reminiscent of the bike-sharing frenzy a few years. The promises of a sizeable addressable market opportunity have resulted in significant sums being raised by specialists (such as Dingdong and Missfresh), tech goliaths (Pinduoduo (PDD US) and Meituan (3690 HK)) and traditional offline stores (such as WM Tech Corporation (WMT HK)) for their respective online grocery platforms. The resulting arms race has led to these players reporting heavy losses for their online grocery segments in the quest to grab market share. It is unclear if Dingdong (and Missfresh) has a sustainable competitive advantage to emerge as one of the winners. The online grocery delivery market is set for a shakeout which means that like bike-sharing, it will result in significant shareholder value destruction. Overall, we would pass on the IPO and wait on the sidelines to see how this plays out.

Dingdong IPO Initiation: An Arms Race Is Brewing