Tiger Global-backed grocery delivery start-up Missfresh is struggling to survive as it shutters operations across China, wallows in an accounting scandal and seeks capital to sustain its business.
Shares in the Nasdaq-listed company have lost 97% of their value since going public in June last year, and this week announced it would further dilute struggling shareholders by issuing 300 million shares to a Shanxi mining group for 200 million Rmb ($30 million).
The sale will give Shanxi Donghui Group a roughly 30% stake in Missfresh and may appoint two directors as part of the deal.
A person familiar with the company said that over the past few months it had held talks with a wide range of suitors, including GOME Electrical Appliances, SF Express and China Resources, as management sought funding or a buyer.
The upheaval marks a sharp turning point for Missfresh, which attracted more than $1 billion in funding from investors including Tiger Global and Goldman Sachs and secured a $3 billion valuation in New York a year ago. . His market value has now dropped to $88 million.
It’s the latest investment to go sour for Tiger, which suffered losses of around $17 billion in this year’s sale of publicly traded tech stocks, marking one of the biggest dollar declines ever. for a hedge fund in history.
Missfresh pioneered a strategy of blanketing cities in mini-warehouses that combined storage of a small number of high-volume items with delivery capabilities, allowing its pink-clad runners to deliver fruit and meat fresh to Chinese households in about 30 minutes.
Management claimed the low-cost model would allow Missfresh to deliver groceries profitably, a notoriously difficult proposition. Investors rallied to fund the venture, with Tiger investing $117 million over several years for a 12% stake while Goldman Sachs injected $66 million.
The funding propelled Missfresh’s expansion into 16 Chinese cities where it operated 625 warehouses as of June 30 last year. But the person close to Missfresh said the business had “grow blindly, blindly opened new warehouses and blindly entered new cities”.
“The cash is drying up. . . if we don’t pay the vendors on time, it will cause a shortage of supplies,” said the person who requested anonymity.
Missfresh denied looking for a buyer and said the company had sufficient supplies.
While Missfresh was unable to release audited financial statements or its annual report for the year to December 31, the company estimated that last year’s losses reached Rmb3.7 billion.
The cash-strapped start-up is also facing multiple lawsuits in China as debt mounts. A supplier named Li told the Financial Times his company still owed more than Rmb226,000 for fruit sold at Missfresh in 2020.
“All payments went well in 2019, but since 2020 they started delaying payments, so we stopped providing . . . and we are taking it to court,” Li said.
This year, Missfresh decided to close its mini-warehouses in at least nine cities, mainly leaving customers in Beijing, Shanghai and Tianjin to enjoy its 30-minute fast delivery service.
Earlier this month, the company admitted that employees of a business unit had created “questionable transactions” that resulted in an overstated revenue of Rmb677 million in the first nine months of last year.
The company said an independent review found no evidence of management involvement and that the employees involved had left the company. As its stock price languishes below a dollar, Missfresh faces the threat of delisting in November.
Missfresh said the closure of warehouses in some cities was to cut costs and some products from suppliers did not meet its standards, which could have resulted in delayed payments. Tiger Global did not immediately respond to requests for comment.