HONG KONG -- Tencent Holdings-backed Pinduoduo on Tuesday shrugged off allegations over its accounting practices, insisting it employed the "highest standards" as it reported better-than-expected third quarter earnings.
Shares in Pinduoduo, which recently listed on Nasdaq, have surged despite accusations from Texas-based short seller Blue Orca that China's third largest e-commerce platform was "uninvestable" as a result of differences between figures reported in its listing prospectus and those submitted to the Chinese government. Pinduoduo shares each closed at $23.14 in New York on Tuesday, up 16.6% from Monday.
"We have always held ourselves to the highest standards and the numbers in our consolidated financial statements are in compliance with the rules and regulations of the SEC," said Vice President of Finance Tian Xu, referring to U.S. regulatory body the Securities and Exchange Commission.
The company did not refer to the differences between its financial figures. The Shanghai-based retailer went public in July in a $1.9 billion float. Blue Orca issued a report last week that said its share price was overvalued by 59%.
By comparing data filed in its listing prospectus and its submission to the Chinese government, Blue Orca alleged Pinduoduo, founded by former Google engineer Colin Huang, made revenue last year that was 36% below the amount disclosed to U.S. investors. On top of that, Blue Orca accused Pinduoduo of trimming net losses and falsely reporting its head count.
Since Blue Orca's report was released on Nov. 14, Pinduoduo's stock price has risen by one third.
This comes at a time when a number of Chinese stocks are plumbing fresh lows, due to concerns over China's economic slowdown as well as the persistent trade conflict between Washington and Beijing. On Tuesday, shares in New York-listed Alibaba Group Holding were 30% down from their June high, while shares in Nasdaq-listed JD.com fell roughly 60% from their peak in January.
Alibaba and JD.com are the country's top e-commerce platforms.
"Pinduoduo's shares have soared because it is one of few companies in China that have achieved a robust revenue growth this year," said Martin Bao, an analyst with ICBC International in Hong Kong.
In the July to September period, Pinduoduo's revenue surged by 697% year-on-year to 3.37 billion yuan ($481 million). Yet, the company has also widened its loss in the third quarter to 1.1 billion yuan from 221.4 million yuan in the same period last year.
Pinduoduo, which made its name serving bargain-hunters in smaller cities and rural China, has also managed to expand its user base. The company claims that half of its users now come from first- and second-tier cities. Pinduoduo "has shown its ability to attract buyers from all classes," Bao said.
Established merely three years ago, Pinduoduo had already grabbed 5.2% of the Chinese e-commerce market at the end of April, according to global intelligence company eMarketer. Its No. 1 rival Alibaba held 58.2% and the second-largest online retailer JD.com had 16.4%.
Pinduoduo offers a platform for shoppers to use social media to buy in groups so as to warrant lower prices. It was characterized by its founder as a hybrid between U.S.-based low-cost supermarket chain Costco Wholesale and Disney, due to its emphasis on value for money and a fun shopping experience.
Blue Orca did not respond to requests from the Nikkei Asian Review for comment.