Pinduoduo, the third-largest ecommerce website in China after Alibaba and JD.com, is facing class-action lawsuits in the US following recent media reports that it has been selling fakes and knock-offs over the platform resulted in share tumbles. Six law firms, including Rosen Law Firm, Pomerantz LLP, Law Offices of Howard G. Smith, Faruqi & Faruqi LLP, The Schall Law Firm, and Bronstein, Gewirtz & Grossman LLC, are looking to file class-action lawsuits on behalf of individual investors who bought Pinduoduo shares, according to a Sina news report on Saturday. Pinduoduo has faced a flood of media reports in China since its initial public offering (IPO) in New York claiming that the platform has been actively selling low-price knock-offs with a high resemblance to brand names of well-known products. Law Offices of Howard G. Smith said on its website that it believes Pinduoduo and certain executives violated federal law, which specifically misled investors regarding its financial condition. Pomerantz LLP said it's investigating concerns whether Pinduoduo and its officers and/or directors have engaged in securities fraud or other unlawful business practices.
Pinduoduo, the third-largest ecommerce website after Alibaba and JD.com in China, has filed for an initial public offering in the US to seek as much as $1 billion on Friday, in a move that surprised the market as the company was established less than three years ago. Founded in September 2015 by a former Google software engineer Colin Huang, the Shanghai-based company is known for its Groupon-like business model, which encourages consumers to shop for similar daily necessities with friends and other netizens in order to receive big discounts on prices, as mechanizers are able to offer cheaper prices due to the large quantities. Underwriters of Pinduoduo's US listing include UBS, Goldman Sachs, and CICC, but the company is yet to determine the stock exchange that will host its initial public offering, according to a Sina news report on July 1. Revenue of Pinduoduo mainly comes from online advertisements and trade commissions. Since its inception, revenue has grown at a high rate, as have losses, according to the report.
Kong Xiaohua, a middle-aged history teacher in a small town near the border with Russia, is among the online world's most sought-after users right now. Going after users like her marks the Chinese internet's race to go low: lower income, lower-tier cities and lower internet-service penetration. Ms. Kong shopped online for the first time last year. Using a social commerce app called Pinduoduo, she's bought clothes and household products such as adhesive wall hooks. She also started spending a lot of time on Qutoutiao, a news app that runs content based mostly around relationships, cheap comedy and sensational social news.
Colin Huang's ascent is one for the history books: In just six months, his fortune swelled by $25 billion -- one of the biggest gains among the world's richest people. His Pinduoduo Inc., a Groupon-like shopping app he founded in 2015, has become China's third-largest e-commerce platform, with a market value of more than $100 billion. In the first quarter, as the coronavirus pandemic caused most of the nation's economy to grind to a halt, PDD's active users surged 68 percent and revenue jumped 44 percent, the company said in May. Now Huang, who has overseen the firm as its American depositary receipts have more than quadrupled in less than two years, has stepped down as chief executive officer. At one point, his net worth climbed as high as $45 billion, placing him just behind China's wealthiest people -- Tencent Holdings Ltd.'s Pony Ma and Alibaba Group Holding Ltd.'s Jack Ma -- on the Bloomberg Billionaires Index.
But in 2018, things stopped being normal. Across his industry, the US-China trade war had begun to strain apparel makers, one of China's manufacturing sectors with the largest reliance on export sales. Orders that had been placed and made in advance were being delayed up to three months for shipping, hitting Zhu's profits and clogging up his storage space with unsaleable inventory. Then, before his business had fully recovered, covid-19 ripped through the world. Exports tanked, saddling Zhu with a stream of order cancellations worth an estimated $4 to $5 million.