🛍️ PDD's massive cash pile
PDD Holdings, the parent company of Temu, has built a $38B cash reserve, the largest among listed companies that do not offer dividends or share buybacks. This positions it ahead of companies like Tesla, which holds just half that amount. PDD’s decision not to return any cash to shareholders stands out, given that even major players like Berkshire Hathaway have initiated stock repurchases. PDD’s current cash reserve, including $9.3B in longer-term investments, is about 36% of its $133B market value. This strategy has sparked concern among investors.
📉 Stock plunge after decision
PDD's stock plummeted 31% this week following its announcement that it would not pay dividends or buy back shares "for the foreseeable future." The decision was delivered during a conference call, where only two analysts were allowed to ask questions. Investors were taken aback by the company’s lack of detailed guidance, with analysts from JPMorgan calling PDD's disclosures "too limited" to understand their financials. Many view the lack of transparency as a “red flag.”
🌍 Global expansion and controversies
PDD has rapidly expanded from China into 49 global markets, driven by its ultra-low-cost online marketplace, Temu. Despite its growth, the company has faced criticism over its opaque financials, treatment of employees, and supply chain issues. PDD’s meteoric rise and its rivalry with Alibaba and JD.com have made it a controversial figure in the ecommerce space. This week’s stock plunge only amplified concerns about its financial practices and potential hidden risks in its cash holdings.
📊 What the future holds
As the company faces criticism, PDD’s management insists its strategy is sound. "Each company makes decisions based on its unique circumstances," a spokesperson said. PDD has remained firm in its approach, directing investors to its past statements emphasizing its broader social and economic goals. While JPMorgan maintains an "overweight" rating on PDD, some investors remain cautious, particularly as other Chinese tech giants like JD.com and Meituan have embraced buybacks. PDD’s refusal to follow suit keeps it under scrutiny, leaving many wondering what its long-term strategy truly is.
Should PDD focus on more transparency or return cash?
