By Summer Zhen
HONG KONG (Reuters) – Concentrated bets on popular Chinese e-commerce giant PDD Holdings can have led to losses in billions of dollars for hedge funds from a crash in its shares following downbeat comments from its executives.
U.S.-listed shares in PDD, the owner of low-priced retailer Temu, plummeted 33% this week, and 30% within the third quarter.
BY THE NUMBERS
Global hedge funds held 102.8 million shares of PDD at the top of June, up from 91.7 million shares the previous quarter, based on an estimate by WhaleWisdom, a web site that tracks and analyses quarterly U.S. 13F filings.
It’s unclear if hedge funds increased or reduced their investments since then, but Reuters’ calculations show the 30% fall in PDD shares between the top of June and Aug. 29 would have worn out a combined value of roughly $4 billion from those positions.
A few of Asia’s largest hedge funds, including billionaire Zhang Lei’s HHLR Advisors, Tairen Capital, Greenwoods Asset Management, were amongst the key investors in PDD by market value as of June 30, based on WhaleWisdom.
Amongst global hedge fund giants, David Tepper’s Appaloosa Management owned 1.94 million shares of PDD at the top of the second quarter, price greater than $250 million.
THE CONTEXT
PDD missed market estimates for quarterly revenue on Monday. In the course of the earnings call, the firm said revenue growth would face pressure resulting from intensified competition and external challenges, and there have been no plans for dividends or share buybacks.
WHY IT’S IMPORTANT
PDD has been a top pick for a lot of funds investing in China, because the budget product platform is considered one of the few firms within the country still delivering growth and expanding globally amid the economic downturn.
The unexpected bearish guidance, coupled with the stock slump, has further dampened sentiment toward already struggling Chinese equities, dragging down tech and consumer shares.
KEY QUOTE
“PDD was a crowdy long position for a lot of calibre of clients,” said Andy Maynard, global head of equities at China Renaissance Securities, “I’m sure the 30+% selloff has been difficult for all sorts of funds.”
“When it comes to the guidance, it was really poor… Overall, it would make some investors as pessimistic as ever, and sure mean a seamless narrowing of their portfolios into names that they trust, have transparency and may see future growth,” he said.
(Reporting by Summer Zhen; Editing by Vidya Ranganathan and Jamie Freed)