Chinese E-Commerce Mogul Gains $3 Billion In One Day Despite Sluggish Economy

Colin Huang, the reclusive billionaire behind Pinduoduo, saw his wealth surge by $3 billion in a single day after his discount e-commerce platform reported earnings that beat expectations by a wide margin.

The 42-year-old tech tycoon derives the bulk of his fortune from Pinduoduo’s Nasdaq-listed shares, which rallied 14.7% on Monday. The Shanghai-based company reported the same day that its second-quarter revenue came in at $4.7 billion, a jump of 36% from a year ago. Net income, during the same period, almost quadrupled to $1.3 billion.

Chen Lei, who assumed the role of chairman after Huang stepped down from the helm of the company in March 2021 (the tycoon still owns a 28% stake), attributed the strong performance to a recovery in consumer sentiment. In an analyst call on Monday, Chen said the release of pent-up demand following the lifting of Covid-19-related restrictions in major cities, as well as successful promotional campaigns, such as the 6.18 shopping event held during the April-June period, have all helped to boost the company’s topline growth. Pinduoduo’s bottom line benefited from an overall reduction in expenses such as those from investments, business travels and various projects.

Analysts say the weakening macro environment is actually helping to lift Pinduoduo’s shares, which have risen almost 18% this year, but are still down 30% over the past 12 months.

Pinduoduo’s competitors haven’t fared as well recently. Alibaba reported earlier this month that last quarter’s revenue was flat and JD.com said its sales increased 5.4% during the same period.

Pinduoduo has been able to attract consumers by touting cheaper daily goods, such as eggs priced at $1.7 per kilogram and toilet paper rolls that cost less than $1. “Relatively speaking, the downward economy is good for Pinduoduo,” says Ke Yan, head of research at Singapore-based DZT Research.

Shawn Yang, a Shenzhen-based managing director at research group Blue Lotus Capital Advisors, says Pinduoduo is also retaining many of those bargain hunters with its nascent Duoduo Video, or the company’s short video platform where users can receive cash coupons while watching various entertainment and sales clips. He estimates that Duoduo Video has as much as 80 million daily active users.

But as business activities gradually resume in China, Chen hinted at a potential increase in expenses that could have an impact on future profitability.

“In the past quarter, and especially during the first half of the second quarter, our team’s investment activity was impacted,” he said during yesterday’s analyst call. “And during the short term, this might bring about decent financial results. But if we look at it with a long-term perspective, this actually weakens our competitiveness.”

Pinduoduo says it’s also seeking to expand overseas. The company is reportedly entering the U.S. as its first venture outside of China, and it’s currently busy making preparations by signing on merchant partners. When asked about the potential move, Chen said foreign markets represent one of the opportunities for the company, and Pinduoduo wouldn’t “repeat what others have done,” without going into further detail.