Meituan Stocks Losing Streak Likely To Continue As IPO Lock-up Set To Expire

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Financial information books for Meituan Dianping sit stacked during a news conference in Hong Kong, China, on Thursday, Sept. 6, 2018. Meituan Dianping pledged to keep investing in unprofitable businesses such as food delivery but back-tracked on its car-hailing ambitions, signaling a willingness to throttle back on a spending frenzy that’s swelled losses. Photographer: Paul Yeung/Bloomberg

The worst may be to come for Meituan Dianping, as key investors who could only watch the stock shed more than $13 billion in market value since it listed will be able to join in the selling next week.

A six-month lockup period during which employees and cornerstone investors are banned from disposing of their shares is set to expire next week. Meituan has dropped 24 percent since listing in September, and its stock was dumped on Tuesday after the food delivery company reported widening losses for the December quarter.

Up to 2.6 billion of public float shares held by pre-IPO and cornerstone investors are set to be unlocked next week, according to its prospectus. The company’s employees were granted 512 million shares when the company listed, and lock up periods for those will also expire next week. Shareholdings of Tencent Holdings Ltd. and those held by funds of Sequoia Capital are not counted toward the public float.

Some shareholders who have owned a piece of the company since its first funding rounds can pocket a significant profit by selling the unlocked shares. Shares bought in a round of funding that started in 2010 cost less than 40 Hong Kong cents each, according to the company’s prospectus. The shares closed at HK$52.35 on Tuesday.

One of Hong Kong’s hottest initial public offerings last year, Meituan has delivered one of the worst returns. Bernstein downgraded the stock after its earnings announcement, saying the delivery company faces challenges as competition from Alibaba Group Holding Ltd. intensifies.

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Bloomberg