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The market value of Pinduoduo, the tech platform owned by Colin Huang, shed $53 billion following the government crackdown in China.
One of the biggest billionaire businessmen in China Colin Huang lost $27 billion after his company’s stocks tumbled due to the Chinese crackdown on internet giants. The share prices of e-commerce platform Pinduoduo Inc (NASDAQ: PDD), which Huang owns 28% of, took a beating.
The Chinese mogul founded the company in 2015, and rapidly scaled it up into an e-commerce powerhouse through community buying. Annual active users of PDD’s platform surged to 788 million in December, even exceeding Alibaba’s, which had 779 million users.
PDD’s market value crested at $178 billion before dropping to $125 billion. Last month, the agriculture-focused, tech firm reported its first quarterly earnings as a public company. The company however faced some criticism back in January, over employee welfare and staff working conditions.
Colin Huang Wealth Drop Much Larger Than China Evergrande Group Chairman Hui Ka Yan’s
Huang’s fortune drop now represents the biggest single loss by anyone else in the world. It far surpasses the $16 billion lost by his fellow Chinese compatriot Hui Ka Yan, Chairman of Evergrande Group. Yan’s real estate business is contending with a lot of debt-related issues. Huang, who now has a reported net worth of about $35 billion, quit his role as chief executive officer in 2020. Furthermore, he also stepped down as company chairman earlier in the year.
Chinese president Xi Jinping is trying to level the playing field for China’s commerce and also close the nation’s wealth gap. The president has a firm hand on China’s private-sector companies and imposed more regulatory restrictions on them. Shares of various leading firms in China, such as Alibaba Group Holding Ltd., and Tencent Holdings Ltd. fell. Some businesses, such as Pinduoduo (PDD), are worse hit than others.
Kenny Ng, a securities strategist at Everbright Sun Hung Kai Co. in Hong Kong, weighed in on PDD. According to Ng, the company’s less stable footing is the reason it is worse hit than older companies like Alibaba. In Ng’s own words, PDD is “…more vulnerable to the crackdown compared to those peers with mature and profitable models. That’s the main reason for the stock performance lagging behind other tech companies”.
Other China-based Billionaires Suffer Significant Losses
Of the ten billionaires who suffered the biggest declines this year, six are from China. They include Zhong Shanshan, chairman of bottled water company Nongfu Spring Co, who lost $18 billion. Furthermore, Tencent’s Pony Ma lost $10 billion, and the aforementioned Hui Ka Yan of Evergrande shed $16 billion.
PDD’s American depositary receipts dropped by 44% this year, higher than the 33% slide by Alibaba’s ADRs. In addition, shares of tech holding company Tencent declined 20% this year in Hong Kong.
PDD is one of a few Chinese tech giants that pledged current and future corporate profits to philanthropy projects. Last month, the e-commerce company pledged to allocate $1.5 billion in earnings to the development of agriculture in the country. Before that, PDD’s founding team contributed $2.4 billion in company stock to a charitable trust last year.