Hedge funds could lose billions as Temu owner PDD’s stock tumbles

By Summer Zhen

HONG KONG (Reuters) – Bets on popular Chinese e-commerce giant PDD Holdings could have led to billions of dollars in hedge fund losses as its shares tumbled following adverse comments from its executives.

US-listed shares in PDD, the owner of discount retailer Temu, fell 33% this week and 30% in the third quarter.

BY NUMBERS

Global hedge funds held 102.8 million shares of PDD at the end of June, up from 91.7 million shares in the previous quarter, according to an estimate by WhaleWisdom, a website that tracks and analyzes quarterly US 13F filings .

It’s unclear whether hedge funds have increased or decreased their investments since then, but Reuters calculations show that the 30 percent drop in PDD shares between late June and Aug. 29 would have wiped out a combined roughly $4 billion in those holdings. positions.

Some of Asia’s biggest hedge funds, including billionaire Zhang Lei’s HHLR Advisors, Tairen Capital, Greenwoods Asset Management, were among the major investors in PDD by market value on June 30, according to WhaleWisdom.

Among global hedge fund giants, David Tepper’s Appaloosa Management held 1.94 million shares of PDD at the end of the second quarter, worth more than $250 million.

CONTEXT

PDD missed market estimates for quarterly revenue on Monday. During the earnings call, the firm said revenue growth would face pressure from intense competition and external challenges, and that there were no plans for dividends or share buybacks.

WHY IT’S IMPORTANT

PDD has been a top choice for many funds investing in China, as the budget products platform is one of the few firms in the country still delivering growth and expanding globally amid the economic downturn.

The unexpected bearishness, along with the fall in stocks, further dampened sentiment toward already struggling Chinese stocks, dragging down tech and consumer stocks.

KEY QUOTE

“PDD has been a crowded long position for many caliber clients,” said Andy Maynard, global head of equities at China Renaissance Securities, “I’m sure selling over 30% has been difficult for all fund types.”

“In terms of guidance, it’s been really weak… Overall, it’s going to make some investors as pessimistic as ever and probably means a continued narrowing of their portfolios to names that they trust, have transparency and can see future growth.” he said.

(Reporting by Summer Zhen; Editing by Vidya Ranganathan and Jamie Freed)