GRUB GrubHub Inc

By Julie Steinberg and Stella Yifan Xie 

Meituan Dianping, one of China's most popular internet startups, is marketing a public stock sale that could value the company at close to $55 billion, sharply higher than less than a year ago.

The Beijing-based online-services company, which counts Chinese technology titan Tencent Holdings Ltd. as one of its main backers, is set to launch its initial public offering in Hong Kong this week at a time of turbulence for Chinese tech stocks and broader Asian markets.

Meituan, which hasn't yet turned an annual profit, sells discount vouchers similar to those offered by Groupon Inc., provides online reviews and restaurant listings akin to those of Yelp Inc. and, like Grubhub Inc., offers food-delivery services. It also sells movie tickets and offers hotel and other travel services. The company was formed in 2015 through a combination of two online platforms providing services to China's growing middle class.

Meituan is planning to raise up to $4.5 billion in the IPO, according to people familiar with the matter. The company will offer its shares to global investors at a price range of 60 to 72 Hong Kong dollars (US$7.64 to US$9.17), they said.

At the low end of that range, the startup would be valued at US$45.5 billion before listing, and at the top end it would attain a market valuation of US$54.7 billion.

Meituan is one of China's largest privately owned internet companies. Its share performance will reflect how optimistic global investors are about the growth prospects of the country's swelling ranks of technology startups. The IPO will also serve as a gauge for the level of global interest in Chinese consumer buying power.

Meituan's IPO is being closely watched by investors, bankers and entrepreneurs, as it is the most important Chinese company to list after smartphone maker Xiaomi Corp.'s lackluster debut in July. Xiaomi's valuation, which was cut leading up to the IPO, ultimately totaled around US$54 billion.

Xiaomi shares climbed after listing but are now slightly below their IPO price, valuing the company at about US$52.7 billion.

"Market sentiment has certainly become worse than two months ago," said Hao Hong, head of research and strategy at Bocom International. Still, he said investors might remain bullish on Meituan's growth prospects and business model, which is less capital intensive than Xiaomi's.

Investors have so far been more bullish on Meituan's prospects, reasoning that Xiaomi is more of a hardware company whereas Meituan is better positioned to capitalize on China's fast-growing internet consumer economy. Still, the company is burning through cash in a battle for market share with deep-pocketed rivals including Alibaba Group Holding Ltd., and it posted a nearly 19 billion yuan (US$2.78 billion) loss last year even as revenue more than doubled to 33.9 billion yuan.

In October 2017, Meituan raised $4 billion in private capital by a Tencent-led investor group that valued the company at US$30 billion. Other investors in that round included U.S. travel portal Booking Holdings Inc., formerly known as Priceline Group, as well as the Canada Pension Plan Investment Board.

The company's IPO will also be bolstered by some high-profile investors. Large global and Chinese money managers are among the so-called cornerstone investors that will buy US$1.5 billion of the IPO shares, or about a third of the offering size, said a person familiar with the matter.

Tencent, Meituan's largest institutional investor with more than a 20% stake, has agreed to commit US$400 million to the IPO, while OppenheimerFunds, a financial investor, committed US$500 million, said a person familiar with the matter. Other cornerstone investors include U.K.-based Lansdowne Partners, Darsana Capital Partners of New York and an investment fund controlled by China Chengtong Holdings Group, a Chinese state-owned company, the person said. The firms didn't immediately respond to requests for comment.

Meituan's offering price range and other details were earlier reported by IFR.

Despite the choppy markets, some investors and bankers are confident the offering will be well received, owing to the ubiquity of Meituan's services and China's exploding smartphone use. In June, Meituan said in a filing that it served 310 million "transacting users" last year, referring to customers who made at least one transaction on its platform.

Meituan's shares are scheduled to start trading in Hong Kong on Sept. 20. Goldman Sachs Group Inc., Morgan Stanley and Bank of America Merrill Lynch are the lead banks handling the offering.

Write to Julie Steinberg at julie.steinberg@wsj.com and Stella Yifan Xie at stella.xie@wsj.com

(END) Dow Jones Newswires

September 03, 2018 02:50 ET (06:50 GMT)

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