China’s leading social e-commerce platform Pinduoduo (NASDAQ: PDD) announced on 19 April 2020 it will subscribe to US$200 million in convertible bonds (“CBs”) issued by household appliance and electronics retailer GOME Retail Holdings Limited (“GOME”) (HKEX: 493.HK) as part of a strategic partnership to bring more value-for-money merchandise to its 585.2 million users.
The CBs will have a coupon rate of 5% per annum and a tenure of three years, with an option to extend by two years at the election of PDD, according to a statement by GOME. The CBs are convertible at HK$1.215 per share, which works out to approximately 1.28 billion GOME shares or approximately 5.6% on a fully diluted basis.
“This strategic partnership is a win-win-win,” said Mr. David Liu, Vice President of Strategy at PDD. “Consumers win because they get a wider range of top domestic and international brands at competitive prices, GOME wins because they can broaden their access to our 585.2 million users, and PDD wins because we enhance our foothold in household appliances and electronics.”
The tie-up marks the first strategic investment by Pinduoduo and comes after its US$1.1 billion share placement to long-term investors in March, when it said it will use the proceeds to enhance user experience.
The partnership also strengthens the e-commerce platform’s position in household appliances and electronics while accelerating its push into consumer-led manufacturing.
As part of the partnership, PDD will help bring the entire GOME product range, including top domestic and international brands such as Siemens, Sony, Haier, Gree and Midea, onto Pinduoduo platform at competitive prices.
PDD will also help GOME’s digitization strategy, extending PDD’s technological capability to help the retailer upgrade its supply chain and tailor its product range to consumer needs and preferences.
GOME will integrate its logistics, delivery and assembly services with the PDD platform to enhance user satisfaction.
With GOME’s extensive network of stores across China, PDD users will be able to enjoy an extension of their user experience to try and experience the products before placing their orders.
The deal also furthers PDD’s push into the consumer-to-manufacturer (C2M) realm by working with GOME to source for products that are tailored to customers’ needs.
Founded in 2015, the Shanghai-based company has seen rapid growth as it builds on its strength in all product categories, including household appliances and electronics.
Pinduoduo exceeded RMB 1 trillion (US$144.6 billion) in GMV for the 12-month period ended December 31, 2019. The company saw a 40% increase in active buyers in the same period to 585.2 million, while annual spending per active buyer jumped 53%.
Alibaba launched a new app Taobao Special Offer in March 2020 to compete with Pinduoduo on C2M.