拼多多沽空报告（中英全文）-Blue_Orca-2018.11-7mb

Blue Orca Capital Research Report on Pinduoduo (PDD)

Core Content Overview

This report by Blue Orca Capital is a short seller's analysis of Pinduoduo Inc. (NASDAQ: PDD), focusing on alleged financial misrepresentation and operational inefficiencies. The firm claims that PDD's financial performance, particularly its revenue, gross merchandise value (GMV), and staffing costs, is significantly inflated or understated, leading to an overvaluation of the company.

Main Points and Key Findings

1. Financial Misrepresentation

• Revenue Overstatement: PDD's SAIC filings indicate that its 2017 revenues were 36–40% less than reported in SEC filings. Specifically, two VIE subsidiaries reported only RMB 1.2 billion in total revenue, while PDD claimed RMB 1.95 billion.
• Net Loss Understatement: PDD's net losses in the PRC were 65% higher than disclosed in SEC filings. The SAIC filings show a combined net loss of RMB 689 million, compared to RMB 417 million reported by PDD.
• Staffing Cost Understatement: PDD's reported headcount was 1,159 as of December 31, 2017, but its own website indicated over 5,000 employees. This discrepancy suggests understated staffing costs of RMB 489 million.
• GMV Inflation: PDD's reported GMV is inflated by 34–47%, based on multiple data points:
  • Payment Processing Costs: Implied GMV is 43% less than reported.
  • Commission Fee Revenues: Implied GMV is 34% less than reported.
  • Merchant Cash Cycle: Implied GMV is 47% less than reported.

2. Unreported Related Party Transactions

• Lequee's Role: Lequee, a related party controlled by PDD's founder, is suspected of secretly staffing PDD and shouldering some of its costs.
• Job Postings: Lequee advertised for PDD-related positions, including roles like "PDD event coordinator" and "PDD public relations manager." PDD also posted job ads for Lequee's offices, which it does not disclose.
• Implications: These transactions suggest that PDD's financial statements may not reflect the full cost structure, potentially misleading U.S. investors.

3. Valuation Concerns

• Price-to-Sales (P/S) Multiple: PDD trades at 21.7x LTM sales, which is twice Alibaba's P/S multiple and 44 times JD.com's.
• Blue Orca Valuation: Adjusting for the overstatement of sales, PDD's shares are valued at $7.10 per share, a 59% downside from its current price.
• Price-to-GMV (P/GMV) Multiple: Adjusting for the overstatement of GMV, PDD's shares are valued at $8.05 per share, a 53.1% downside from its current price.

4. Business Model and Growth Sustainability

• Social E-commerce Model: PDD's model encourages users to share products and invite others to join purchases, which drives user growth but may not be as scalable or profitable as claimed.
• Low Profit Margins: PDD's reported take-rate is low compared to Alibaba and JD.com, and its average ticket size is RMB 33, significantly lower than its peers.
• Unsustainable Growth: The report argues that PDD's growth is driven by low-quality goods and lower-tier cities, suggesting that the business is not as lucrative or impressive as it appears.

Conclusion

Blue Orca Capital concludes that PDD's financial and operational performance is misrepresented, and its business is not as valuable as it claims. The firm believes that PDD's valuation is based on inflated metrics and disclosed inaccuracies, leading to an overvaluation. As a result, PDD is deemed uninvestable by the report, and its stock is expected to experience a significant decline based on adjusted financial figures.

Key Figures Summary

Investor Warning

Blue Orca Capital emphasizes that this report is biased and not financial advice. Investors are urged to conduct their own research and due diligence before making any investment decisions. The firm believes that PDD's lack of transparency and its financial misrepresentation make it uninvestable.