From “richest man” to “retirement”: Huang Zheng has won

Welcome to the WeChat subscription number of “Sina Technology”: techsina

Text / Xie Zefeng

Source/Cninwave WAVE (ID: WAVE-BIZ)

In a very short period of time, Huang Zheng gave the CEO, the richest man, the chairman, and the voting rights. After the transfer of more than 10 billion shares, after becoming famous, Pinduoduo lost the magic power of “slashing a knife”, and the stock price began a long road of decline, which has plummeted by 70% so far. Huang Zheng is almost “precise stepping”.

At the highest point, he successfully retired, and Huang Zheng’s speed and timing of his retirement were very surprising to the outside world. But now it seems to be almost the best option for it.

Duan Yongping’s proudest “disciple” retired behind the scenes at the age of 40. Quite by chance, Duan Yongping chose to leave BBK to live in the United States at the age of 40. Since then, Duan Yongping has become a god-level figure in the investment world by investing in NetEase, Apple, and Maotai.

Huang Zheng said in his outgoing chairman’s letter to shareholders: “The increasingly fierce and even alienated competition in the industry has made me realize that the traditional scale and efficiency-oriented competition has its inevitable problems.” The core technology and its basic theory find the answer.”

As a retail channel, the problems faced by e-commerce are more practical problems, but Huang Zheng “wanted to do some research in the fields of food science and life science”. Such a claim is obviously unconvincing. It looks like it will help Pinduoduo (and its shareholders), but it’s more like a rather “poetic” excuse for his retirement.

Nowadays, the situation of the Internet is changing, the industry regulation is becoming stricter, the bosses are sad, the Chinese stocks have fallen in a “collapsed way”, and the wealth of shareholders has shrunk dramatically, and all this happened after Huang Zheng left.

Looking back, Huang Zheng’s retirement was too mysterious, and it was too time for the stock to sell, which can be called a complete victory.

From boom to bubble

Although Pinduoduo still occupies the third position in the industry, its growth is already “fatigued”.

Pinduoduo is the most ferocious dark horse in the e-commerce arena. There is no ancient person before, and there will be no follower in the future.

To break through the trillion-dollar transaction volume, it took Ali 9 years, JD.com 13 years, and Pinduoduo only 4 years. It was listed after 3 years of establishment, and rose to become the fourth largest Internet company in China within 5 years.

You should know that when Pinduoduo was listed in 2018, Taobao and JD. Doto increase to 15%.

At the end of 2020, Pinduo’s multi-year active users officially surpassed Alibaba. Pinduo has 788 million active buyers for many years, surpassing Alibaba’s 779 million. From the perspective of annual active buyers, Pinduoduo has become the world’s largest e-commerce platform by user scale.

Just this year, Huang Zheng’s worth surpassed Ma Yun for a while, and briefly ascended the position of China’s richest man. But at the peak, he was acutely aware of something other than prosperity.

“Ultra-low price + social bargaining” is the only secret to the rise of Pinduoduo. Relying on “viral” marketing, Pinduoduo quickly seized the sinking market of the third and fourth tiers, and almost turned the last batch of netizens in China into “e-commerce” change”.

Former Alibaba CEO and founder of Jiayu Fund Wei Zhe once said that because of Pinduoduo, his mother, who had previously refused to use e-commerce, also started shopping online. Wei Zhe believes that Pinduoduo’s contribution lies in “using social methods to bring the last few (not using e-commerce) people in China to the stage of e-commerce.”

But at the same time, he also pointed out, “Pinduoduo has captured non-mainstream people, but it does not mean that all non-mainstream people in China have been captured by Pinduoduo.” Because once they enter the e-commerce world, these discerning users will begin to contact other e-commerce companies. platform, start a new comparison.

Moreover, there are also new spoilers in the e-commerce arena. Byte e-commerce and Kuaishou e-commerce rely on the massive short video user base to rise rapidly and grab market share.

Although Pinduoduo still occupies the third position in the industry, its growth is already “fatigued”. Pinduoduo will have 868.7 million active buyers at the end of 2021, with the growth rate dropping to only 10%.

In terms of user scale, Ali has 880 million domestic e-commerce users, surpassing Pinduoduo and regaining the number one position in the number of users. JD.com will add nearly 100 million new users in 2021, and the number of active purchasing users will reach 570 million. The number of active buyers of Pinduoduo is not as good as that of Alibaba, and the 80.3 million new users added are not as good as that of JD.com.

For the whole year of 2021, Pinduoduo’s GMV scale is 2.4 trillion yuan, an increase of about 46% year-on-year, and the growth rate has slowed down significantly. It should be noted that the growth of Pinduoduo’s user scale has slowed down and the number of orders has increased, but the unit price has dropped to 40 yuan per order, which is less than half of the industry average.

It can be seen that Pinduoduo still has not gotten rid of the “low price” label. During the industry reshuffle period, Pinduoduo chose to “give up speed for profit” and cut marketing expenses significantly, resulting in an operating profit of up to 6.9 billion in the fourth quarter. But it’s not clear when this strategy of “cutting expenses to make a profit” will be most effective.

Pinduoduo has been in a state of “savage growth” for many years, and the sinking promotion represented by “slashing a knife” has also been controversial. On March 17 this year, an anchor invited 60,000 people to help him participate in the Pinduoduo haggling event to get a mobile phone for free. However, even though 60,000 people participated in the haggling, not a single mobile phone came out.

Finally, under the pressure of public opinion, the anchor received a coupon of 0.01 yuan for a mobile phone from Pinduoduo.

From “richest man” to “retirement”

The prosperous annual report data in 2020 finally turned a series of investment bigwigs into moths to put out the flames.

As a retail format with innovative models, e-commerce itself does not have too deep a moat. As Huang Zheng said, “competition based on scale and efficiency will eventually lead to problems.” The so-called “Costco + Disney” version of the e-commerce company is like a dream bubble.

The rapid rise of Pinduoduo has created a huge wealth myth in a short period of time. But when this model swept the sinking market across the country, it was the time when capital was withdrawn from its origins.

In 2020, Huang Zheng’s worth once reached 321 billion yuan, far surpassing the second Ma Yun to become the new richest man in China. As the founder of the company, Huang Zheng chose to retire quickly in a very short period of time, as if the position of the “richest man” was on pins and needles.

On July 1, two years ago, Huang Zheng finally decided to step down as CEO, and Chen Lei, the co-founder and CTO of Pinduoduo, will take over. At the same time, Huang Zheng established the “Fanxing Charity Fund”, and together with the founding team, donated 113,548,920 ordinary shares (about 2.37% of the company’s total shares) of Pinduoduo’s listed company. The shares are transferred to the Pinduoduo partner collective, and 3.77% is returned to the angel investors.

It has been 436 days since Huang Zheng officially retired from Pinduoduo on March 17 last year. According to the Forbes list, Huang Zheng’s wealth has decreased from US$55.3 billion in 2021 to US$11.3 billion this year, and his personal book wealth has shrunk significantly.

In terms of shareholding, according to Pinduoduo’s latest financial report, as of February 28, 2022, founder Huang Zheng held 27.9% of the shares, which was significantly lower than the previous 43.3%.

Before Huang Zheng’s massive liquidation of his shares, a series of well-known investment institutions bought shares in Pinduoduo in the fourth quarter of 2020, with the amount calculated in US$100 million. Among them, Hillhouse Capital and Jinglin Assets bought about 3 billion US dollars in total, and Gaoyi Assets, Bridgewater, Himalaya and other institutions also bought different amounts.

By 2021, the Pinduoduo stocks bought by these institutions at high prices will be reduced on a large scale. Among them, Hillhouse will directly clear the positions, and Jinglin and Gao Yi have lost most of them.

Previously, in an article titled “How Many Big Brothers Planted on Pinduoduo” , Juchao systematically summarized the changes in the proportion of equity capital held by Huang Zheng and a group of people during that critical period. Its prosperous annual report data in 2020 has made a series of investment bigwigs a moth to the flames.

The “mistakes” of the investment bosses fulfilled Huang Zheng’s feelings, and he was able to start to allocate the equity value of Pinduoduo at the highest position. There have also been unconfirmed rumors in the market that he has sold out the Pinduoduo shares held by the Fanxing Public Welfare Fund. If converted according to the market value of Pinduoduo during the period, Huang Zheng’s reduction in holdings is about between 10 billion US dollars and 100 billion yuan.

The shares transferred by Huang Zheng to angel investors are also not to be underestimated—that is, the investment return of his mentor Duan Yongping, which was valued at nearly 40 billion US dollars at the peak. According to the current low price of 50 US dollars per share, it is also about 10 billion US dollars.

If the master and the apprentice reduce their holdings together, even if they only sell part of the stock, it is enough to hit Pinduoduo’s share price to a fairly low position.

Even a low enough share price, however, still warrants the pair being able to reduce their staggering dollar cash holdings.

In contrast, Pinduoduo will earn 93.9 billion yuan (about 14.743 billion U.S. dollars) in 2021 with good operating performance, an increase of 58% compared to 59.4919 billion yuan in 2020. Net profit attributable to ordinary shareholders of Pinduoduo was 7.7687 billion yuan, or about 1.2191 billion U.S. dollars.

From wolf to escapism

Huang Zheng used practical choices to tell people the difference between investment thinking and industrial thinking.

Unlike all other entrepreneurs in the Chinese Internet circle, Huang Zheng has an investment guru as his life mentor.

According to the currently available public information, Huang Zheng met Duan Yongping after graduating from a domestic university and when he entered the University of Wisconsin for a master’s degree. He suggested that Huang should work at Google, which was developing rapidly at the time. This was also the beginning of Huang’s Internet career.

As we all know, Duan Yongping took Huang Zheng with him after taking pictures of his lunch with Buffett. But few people have thought about it: after having an investment guru as a life mentor and meeting Buffett, what will happen to a person’s thinking, and will his entrepreneurship be like other entrepreneurs?

Huang Zheng used practical choices to tell people the difference between investment thinking and industrial thinking.

He once said bluntly that he realized one thing when he was in school:

Money is a means, not an end.

He even revealed what Duan Yongping told him:

“If you have no ambitions, just do the present well.”

In addition, in addition to learning profound investment thinking, Huang Zheng has also read and thought deeply in the fields of philosophy and Buddhism. He read Russell’s “The Road to Happiness” and summarized three key points:

1. Have the courage to face trials, use common sense to make rational judgments, and use rational ideas to guide your actions.

2. The interest in achieving an infinite perfect self should be transferred to the interest in external objective things.

3. Learn to give up on things that cannot be changed and cannot be conquered.

Through the study of Buddhist classics, the combination of quantum mechanics and mathematical logic, he concluded two key points:

1. The world is unknowable, at least not precisely measurable, unmeasured, and uncertain.

2. It is impossible to describe the normative world with limited rules. Things are imperfect and incomplete.

These studies and thinking constitute a different thinking system between Huang Zheng and other entrepreneurs: on the one hand, he has the wolfishness and desire of other Internet giants, on the other hand, he has read the classics of philosophers and Buddha, After comprehending the investment wisdom of Duan Yongping and Buffett, he hid his escapist side in the depths of his thinking.

The more accurate judgment ability of value investment thinking on enterprise value, and the deeper understanding of the ultimate purpose of life in the philosophical system, finally led him to make an exit choice at the end of the most brilliant 2020, which seemed to surprise everyone, but only I know where the logic of exiting comes from.

For investors, corporate executives and employees, partners, there is no choice but to accept his choice. Because it involves the deepest life choices and value judgments.

For the public, people’s attention to Huang Zheng is basically only one point: whether he will really start investing in the fields of food science and life science using the Fanxing Public Welfare Fund as a platform as he announced to the outside world.

At the beginning of 2021, the Fanxing Public Welfare Fund announced a donation plan, which will donate 100 million US dollars to the Zhejiang University Education Foundation, Huang Zheng’s alma mater, in the next 3-5 years for “computing + biomedical”, “computing + agri-food” and Scientific research projects in the three innovation laboratories of “Advanced Computing”.

It is almost halfway through 2022, and the Fanxing Public Welfare Fund has not yet announced any related donation plans and related matters.

This article is reproduced from: http://finance.sina.com.cn/tech/csj/2022-06-07/doc-imizirau7001846.shtml
This site is for inclusion only, and the copyright belongs to the original author.