Meituan shares rallied in Hong Kong Monday following reports Chinese antitrust authorities may be wrapping up a four-month antitrust investigation into the food-delivery giant.
The stock surged nearly 8% in Hong Kong Monday, the most in almost two weeks. Chinese authorities may levy a fine of roughly $1 billion on billionaire Wang Xing’s firm for antitrust abuses and require it to revamp its operations, including putting an end to exclusivity arrangements with merchants known as “pick one from two,” Bloomberg News reported Friday.
Since the anti-monopoly probe was announced in April, Meituan has lost more than $50 billion from its market valuation as Beijing ramped up a crackdown on its tech champions that spanned internet commerce to data security. In July, authorities ordered online food companies to ensure workers earn at least the local minimum wage, a move seemingly aimed at Meituan, the nation’s largest such platform.
Any changes to Meituan’s fee collection structure “may hurt the company’s outlook more than hikes in higher minimum wages and insurance and the indicated $1 billion fine,” Bloomberg Intelligence analysts Catherine Lim and Tiffany Tam wrote in a note Friday. “A probable prohibition of exclusive merchant arrangements, which Meituan had abstained from, should not impact the company.”
The fine is roughly in line with market expectations, with Nomura previously estimating a penalty of about $711 million. Still, while the figure is just a fraction of Meituan’s revenue, projected to surpass $6 billion in the June quarter, it could more than double the Internet giant’s projected $790 million quarterly loss.