PDD Holdings, owner of eCommerce firm Temu, is reportedly sitting on $38 billion in cash.
That’s the largest cash position of any listed company that doesn’t pay dividends or buy back shares, the Financial Times (FT) reported Sunday (Sept. 1), days after the Chinese company ruled out investor payouts, sending its stock tumbling.
PDD’s stockpile is more than twice the size of the second-closest contender, car company Tesla, the report added. PDD’s value soared when it expanded beyond China, the FT said, though some investors consider its “hoarding” of cash a red flag.
Last week, PDD released quarterly earnings showing an 86% jump in revenue and a 156% increase in profits, but also sounded a note of caution.
“While encouraged by the solid progress we made in the past few quarters, we see many challenges ahead,” PDD Chairman and CEO Lei Chen said in a news release.
“We are committed to transitioning toward high-quality development and fostering sustainable ecosystem. We will invest heavily in the platform’s trust and safety, support high-quality merchants, and relentlessly improve the merchant ecosystem. We are prepared to accept short-term sacrifices and potential decline in profitability.”
PDD’s share price dropped 31% following that warning and its statement that it was ruling out dividends or buybacks “for the foreseeable future.”
According to the FT, PDD has been the subject of controversy over the rapid expansion of Temu, its treatment of workers and suppliers, and its limited financial disclosures.
The FT report noted that most of the world’s larger companies pay dividends or buy back shares. MSCI’s Investable Market Index, made up of around 2,800 constituents from 47 countries, features 151 companies with more than $5 billion of net cash on their balance sheet as of Wednesday.
Just five of them do not pay dividends or buy back stock, the report said. In addition to Tesla and PDD, that group includes Li Auto, a Chinese electric-car company, payments company Adyen and electric turbine company Vernova.
This spring brought reports that Temu was looking beyond the U.S. for its growth. The company later dismissed those reports, saying that it was pushing into other countries but that does not mean it sees the American market as less important.
Meanwhile, Temu’s battle against rival Shein took on a new dimension recently when the latter company sued the former, alleging that Temu encourages merchants to steal other brands’ designs and blocks them from pulling products from the platform, even in instances in which the seller admits to infringement.
Temu responded by criticizing the “audacity” of Shein’s litigation, noting that its competitor had faced a “mountain” of similar lawsuits.
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