Temu Owner PDD Builds $38B Cash Pile As It Denies Investor Payments

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The Chinese e-commerce group behind Temu, whose shares fell this week after excluding investor payouts, has amassed the biggest cash pile of any listed company that doesn’t pay dividends or buy back shares.

US-listed PDD Holdings has a net cash position of $38 billion, according to FT analysis, more than twice that of its nearest competitor, Elon Musk’s Tesla.

While PDD has grown in value as it has expanded from China to at least 49 markets over the past two years, the cash build-up is seen as a “red flag” by some investors, who say its financials are opaque and his rare communications.

The Shanghai-based company’s share price fell 31 percent this week after it warned record profitability could fall and ruled out dividends or buybacks “for the foreseeable future” in a conference call during which it took questions from only two analysts.

PDD has attracted controversy for the rapid global expansion of ultra-low-cost online scrap marketplace Temu, its treatment of staff and suppliers and its limited financial disclosures as the group grew in size and stock valuation to rival Alibaba.

Most of the world’s big companies pay dividends or buy back shares, even dividend-buying conglomerate Berkshire Hathaway, buying back billions of dollars in shares this year.

MSCI’s stock market index, made up of about 2,800 constituents from 47 countries, had 151 companies with more than $5 billion in net cash on their balance sheets as of Wednesday, according to Bloomberg.

Of that cash-rich elite, only five do not pay dividends or buy shares, an FT analysis found: PDD, Tesla, Chinese electric car maker Li Auto, European payments group Adyen and GE Vernova, the spin-off power turbine group GE in April.

Major Chinese companies announcing new buybacks this week include a $5 billion program at JD, a longtime rival of PDD, a $1 billion deal at food delivery group Meituan and a facility of 1, $3 billion in sportswear group Anta.

PDD generated operating cash flow of $6 billion in the second quarter, bringing its cash holdings and short-term investments to $39 billion.

The company also has other long-term investments of $9.3 billion, which it said mainly includes time deposits and debt securities that PDD declined to further elaborate on. The total for cash and long-term investments is equivalent to 36% of PDD’s market cap of $133 billion.

Following this week’s results, analysts at JPMorgan wrote in a note to investors that “the company’s disclosures remained too limited to understand the drivers behind the financial numbers” and that “investors are confused by the company’s unclear guidance and investment strategy PDD”. The bank maintained its “overweight” recommendation on the stock.

Two hedge fund investors with positions in other e-commerce stocks, but not PDD, both said they considered the lack of share buybacks a “red flag” that could signify potential problems with accounting or balance sheet asset quality.

PDD told the FT that “each company makes decisions based on its unique circumstances and strategic considerations. To imply that there is a ‘red flag’ simply because Company A does not follow the same approach as Company B is frankly absurd.”

A spokesman added that PDD encouraged investors with specific concerns to contact the company and drew the FT’s attention to a letter to shareholders published in its 2018 prospectus.

The letter said: “It is not easy to take a leap of faith in believing in such an unconventional company that strives to meet both the economic and social needs of users and make a positive impact on society.”

Additional reporting by Joseph Cotterill