Ballooning market and research spending hit Meituan in its attempts to diversify.
Bloomberg reports that Chinese food delivery and restaurant review service firm Meituan Dianping booked a massive $22.79b loss (US$2.9b) last year due to soaring market and research expenses even as it files for a blockbuster Hong Kong IPO that could raise as much US$6b at a valuation of US$60b.
Meituan is turning to an IPO to raise cash as it tries to muscle against China’s tech giants like Alibaba, Didi Chuxing and Ofo in its expansion into ride hailing, bikes and travel.
Meituan is not alone in the unprofitability as smartphone maker Xiaomi, which is widely expected to be the world’s largest flotation after Alibaba, also bled $8.58b in Q1. However, Meituan’s long-term growth prospects remain positive as its diversification could provide the necessary boost to widen profit margins.
“Operating loss is narrowing because of scale, as revenue growth outpaces costs. In the long term if the trend continues we should see profits,” said Vey-Sern Ling, a Bloomberg Intelligence analyst.
Here’s more from Bloomberg:
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