Like an intense game of blitz chess, the past week was a mad flurry of strikes and parries, as MissFresh and Dingdong Maicai scrambled to outmanoeuvre each other. Both startups were rushing to be China’s first publicly listed online grocery delivery company– a race that MissFresh won as it raised $273 million in a Nasdaq IPO last Friday.

The stakes of this race were even higher because both Dingdong Maicai and Missfresh operate under a “distributed mini-warehouses” (DMW) model (前置仓). As the name suggests, these companies store their groceries in mini-warehouses– spread across residential areas– to facilitate quicker deliveries and ensure freshness.

Yet, MissFresh’s ‘victory’ meant that it was the first to be hit when the shells landed. With increased regulatory oversight, and Alibaba and Pinduoduo thronging in under the herald of “community group-buy”, the wavering investor confidence contributed to MissFresh’s share price falling by 26% a day after its IPO.

Soon after, Dingdong Maicai also downsized its expectations for its upcoming US IPO. While it had initially aimed to raise over US$357 million, it now sought to hit an adjusted target of US$94 million.

Given these sudden changes, a degree of uncertainty hovered around Dingdong Maicai when it went public on Tuesday. Would it also falter under the cooling appetite of its investors?

The answer, it turns out, was no. Dingdong Maicai’s shares have held to their price after their first day on the New York Stock Exchange:

Dingdong - NYSE performance

The company’s shares finished Tuesday at $23.52 per ADS, hovering slightly above its IPO price of $23.50. A stark contrast to MissFresh’s devaluation, Dingdong Maicai’s stable performance suggests that it may enjoy better public approval than its rival.

As Liang Changlin, its military-born founder,  quite aptly puts it, “[an army must] strike fast and strike hard” to conquer any battlefield (“要炮火猛,反应快”). And strike fast, they have.

It seems like Dingdong Maicai’s timely gambit in the capital market has paid off, quite well.  In fact, on Dingdong Maicai’s second day of trading, its share prices once skyrocketed further to almost $45. Could it be, as some have suspected, that some investors mistook Dingdong’s stocks with Didi’s?

We do not know the real reason behind the surge– but the turnover is high, suggesting frequent trading. Furthermore, given the reduced number of issued shares, a smaller trading volume can elicit drastic price changes.

That being said, agile responses and decisive management can only bring any company so far. Dingdong Maicai may have stood up to the first test, but how it performs in the future will depend heavily on the strength of its business model. As the deep-pocketed giants, especially those that remain run by their founders, compete against 前置仓 with their community group-buy model, this will be a fight worth watching.

Watch out for our analysis soon.

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at hello@mworks.asia.

 

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