A Chinese billionaire and a chairman of Pinduoduo, a high-flying Chinese e-commerce company, has suddenly stepped down.
Why did the Pinduoduo chairman exit the company abruptly?
Colin Huang is China's seventh-richest man, with a stake in the online company worth more than $50 billion. Pinduoduo overtook competing tech giants JD.com and Alibaba with 788 million annual active customers on its website last year, prompting Huang's exit.
However, with the recent deaths of two workers, his company has been mocked for its corporate culture. According to a statement issued by the company on Wednesday, Huang will look at "fresh, long-term prospects," which also revealed that it was now China's largest e-commerce company.
According to BBC News via Yahoo, Pinduoduo's stock, which is worth about $200 billion, dropped nearly 8% due to the report. As a result, it wiped out about $4 billion from the Chinese billionaire's fortune. Following a spike in revenue at his e-commerce company, the former Google employee was briefly listed as China's second-richest individual last year.
For the first time, Pinduoduo's 788 million active shoppers in 2020 would surpass Jack Ma's Alibaba's 779 million annual shopper count. Group purchasing is one of its unique characteristics, in which consumers band together to buy more units at a lower price. They can also play games on the web and earn prizes from time to time.
The Chinese billionaire recently resigned as CEO of Pinduoduo
Huang's decision to step down as chairman was not unexpected. Last summer, the 41-year-old entrepreneur resigned as CEO, and it was predicted that he would soon abandon Pinduoduo's leadership. However, his departure came earlier than anticipated, and at a crucial moment for many of China's tech giants as Beijing tries to rein in the market, CNN via MSN reported.
In a research note published on Thursday, Nomura analysts Jialong Shi and Thomas Shen wrote, "The sudden resignation of Huang was a major negative surprise to investors. Huang was commonly considered as the company's signature person, whose good insight and leadership is regarded by many investors as a key factor in Pinduoduo's growth."
Following Huang's announcement, Pinduoduo's stock fell 7% in New York on Wednesday. Pinduoduo was founded by Huang in 2015 and has rapidly grown into a formidable e-commerce firm. According to figures from Guiyang-based Huachuang Securities, it is also a long way from overtaking the industry leader Alibaba in market share, with around 10% of the market, behind Alibaba's 53% and rival JD.com's 19%.
However, in at least one crucial way, the firm is edging out its greatest rival: On Wednesday, it revealed that it would have almost 789 million active users in 2020, surpassing Alibaba's 779 million.
And it posted a $1.1 billion loss last year; the business is still expanding. It announced on Wednesday that sales for 2020 would double from the previous year, reaching $9.2 billion. Its popularity can be attributed to its success among customers in small towns and remote communities, sectors that most e-commerce businesses have generally neglected over time. During the pandemic, the company's grocery business grew significantly, contributing to last year's expansion.
Huang, who according to Bloomberg, has a net worth of $53 billion and is China's third-richest individual after Nongfu Spring founder Zhong Shanshan and Tencent founder Pony Ma, said he resigned to give himself more time to follow other interests, including his childhood ambition of being a scientist or researcher.
And when they're in their prime, it's not uncommon for Chinese entrepreneurs to abandon their businesses. Alibaba co-founder Jack Ma revealed in 2018 that he would step down as executive chairman to focus on philanthropy. He was 54 years old at the time.
Huang, on the other hand, puts Pinduoduo in a vulnerable spot. For months, Beijing has been cracking down on the software industry, and its scope has sometimes reached Pinduoduo.
The tech giant was fined $230,000 by regulators earlier this month after being accused of selling food on its website at unreasonably low rates to undercut competitors. Pinduoduo has also recently come under fire over claims that it overworked its workforce, with Chinese social media users pointing to the suicides of two workers as evidence of toxic workplace culture. Following one of its employees' death, the firm said it formed a committee to provide psychiatric therapy.