Meituan-Dianping Reveals Huge Losses Ahead of Hong Kong IPO
Liao Shumin
/SOURCE : Yicai
Meituan-Dianping Reveals Huge Losses Ahead of Hong Kong IPO

(Yicai Global) June 25 -- China's Meituan-Dianping has disclosed major losses covering the last three years in the online services platform's prospectus for its much-anticipated initial public offering in Hong Kong.

The Beijing-based company, often referred to as a combination of Groupon and Yelp, accrued losses of more than CNY35 billion (USD5.4 billion) in 2015 to 2017, with over half coming last year, the prospectus shows.

Meituan attributed the negative figures to the increased fair value of the "redeemable convertible preference shares" issued to investors in past financing. The listing represents the second planned multibillion-dollar IPO by a tech startup this year following smartphone giant Xiaomi, which will float on the Hong Kong Stock Exchange next month.

The company is unable to guarantee that its business will be profitable in the future due red ink at its shared bike platform Mobike, which Meituan acquired earlier this year for USD2.7 billion.

Meituan will adopt a dual-class share structure for the IPO, taking advantage of recently amended rules in Hong Kong aimed at enticing China's brightest new economy stars, which typically use weighted voting rights. The firm will issue class A and B shares, with respective holders entitled to 10 votes and one vote per share. Meituan will issue about 5.2 billion shares, consisting of 736 million Class-A and 4.5 billion Class-B.

The company has mandated Bank of America Merrill Lynch, Goldman Sachs Group and Morgan Stanley to jointly sponsor the IPO, with China Renaissance as its exclusive financial adviser.

Founder and Chief Executive Wang Xing has an 11.4 percent stake in the firm through 573 million Class-A shares, while Executive Director Mu Rongjun has 2.5 percent via 126 million shares. Tencent, Meituan's largest shareholder, holds 20.1 percent, followed by Sequoia Capital with 11.4 percent, and other investors with a combined 53.7 percent.

The prospectus discloses that Meituan has three revenue streams -- takeaway delivery, hotel and travel bookings and new business. Food delivery accounted for 62 percent of revenue last year, surpassing that of hotel and travel bookings for the first time. In 2017, earnings from hotel and travel bookings came to a little under one-third, while new business and others contributed 6 percent.

Meituan's userbase totaled some 310 million annual users last year with 5.8 billion transactions closed, generating some CNY357 billion in profit. The firm had 28.9 billion monthly active users by the end of last December.

Editor: William Clegg

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Keywords: Meituan-Dianping , Hong Kong Stock Exchange , IPO , Application Proof , Mobike