Pinduoduo Inc (NASDAQ:PDD) is better able to improve its relationship with the Chinese government compared to rivals such as Alibaba Group Holding (NYSE:BABA) and JD.com Inc (NASDAQ:JD), according to Cathie Wood-led asset management firm Ark Invest.
What Happened: Shares of Pinduoduo have surged about 19% over a week as the Chinese e-commerce company that connects farmers and distributors directly with consumers, reported its first quarterly profit. The company also pledged RMB 10 billion to support the advancement of agricultural technology and improve the livelihood of farmers in China.
“We believe that Pinduoduo’s important role in modernizing China’s agriculture industry and alleviating poverty across Tier 2 and 3 cities is improving its relationship with the Chinese government relative to its competition,” Ark wrote in a note.
Why It Matters: The firm’s bullish take on Pinduoduo comes amid several high-profile antitrust clampdowns on the Chinese big tech companies and follows the company’s warning that it does not expect the profitability to continue.
Wood has begun piling up shares in Pinduoduo, and to an extent in JD, again while continuing to cut its stake in Alibaba.
Earlier this year, Alibaba was slapped with a record $2.8 billion fine for anti-monopoly violations by the powerful Chinese antitrust watchdog.
Earlier this month, China’s biggest tech companies lost more than $50 billion in market value after the government proposed fresh sweeping rules to further curb anti-competitive behavior among the big tech firms.
Price Action: PDD shares closed 1.28% lower at $94.63 on Friday.