Chinese e-commerce company Pinduoduo Inc (NASDAQ:PDD) became the latest tech firm to debut on Wall Street Thursday, with a $1.6 billion IPO that raised eyebrows for its unorthodox business model.
The three-year-old company has been dubbed “the Costco of China” for selling discounted products in group buying deals, but it also has similarities to U.S. social media giant Facebook Inc (NASDAQ:FB) because users can buy items from other users’ online stores.
Pinduoduo’s IPO priced at $19 per American depositary share, valuing the company at about $24 billion. The stock popped nearly 41% to close at $26.70 on its first day of trading.
So how did a relatively unknown e-commerce upstart pull off one of the biggest tech IPOs in recent years?
For one, Pinduoduo has been growing at an astounding pace. In the first quarter of 2018, the company’s gross merchandise volume (GMV) reached $12.79 billion, more than triple the GMV it reported in the same quarter last year.
Pinduoduo’s GMV growth has been fueled by its unique social commerce model, which encourages users to buy products in groups to get discounts. The company says it now has about 290 million active users, most of whom are from China’s Tier-III and Tier-IV cities.
What’s more, Pinduoduo is already profitable, unlike many other loss-making tech startups. In the first quarter of 2018, the company reported net income of $61.93 million, compared to a loss of $41.01 million in the same quarter last year.
Pinduoduo’s IPO comes at a time when many Chinese tech firms are looking to list their shares on U.S. exchanges. Just this week, online search giant Baidu Inc (NASDAQ:BIDU) announced plans to spin off its video streaming business iQiyi in an IPO that could raise up to $500 million.
Other Chinese tech firms that have gone public on U.S. exchanges in recent years include Alibaba Group Holding Ltd (NYSE:BABA), JD.com Inc (NASDAQ:JD) and social media giant Weibo Corp (NASDAQ:WB).
Pinduoduo’s IPO is also the latest sign that Wall Street is still open to new tech IPOs, despite the recent volatility in the markets. Just last month, ride-hailing giant Uber Technologies Inc (NYSE:UBER) raised $82.
While Pinduoduo may be a relative unknown outside of China, the company’s debut on Wall Street is sure to turn some heads and could pave the way for other Chinese tech firms looking to go public. With its strong growth prospects and unique business model, Pinduoduo is one to watch in the months and years ahead.