Chinese e-commerce giant Alibaba Group Holding has further reduced its stake in Hong Kong-listed logistics service provider GoGoX Holdings, which is facing cutthroat competition and regulatory pressure in the mainland’s intracity delivery courier market.
Alibaba, which owns the South China Morning Post, has cut its GoGoX stake four times over the past two months, slashing its equity holding to 8.89 per cent as of late December from 12.23 per cent in mid-2023, according to Hong Kong stock exchange records.
Following those moves, the biggest shareholder of GoGoX remains billionaire Yao Jinbo – the founder, chairman and chief executive of mainland Chinese online classifieds giant 58.com – with a 38.69 per cent share. GoGoX co-founder Chen Xiaohua, with a 5.95 per cent stake, retains his position as the company’s third-biggest shareholder.
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Founded as GoGoVan in Hong Kong in 2013, GoGoX became the city’s first unicorn in 2017 after its merger with short-distance freight service platform operator 58 Suyun. Still, GoGoX has recorded losses since 2018 owing to stiff competition on the mainland and its continued international expansion.
GoGoX, one of Asia’s first mobile app-based logistics services platform operators, has expanded its operations over the years from Hong Kong to mainland China, Singapore, South Korea, India and Vietnam. Image: GoGoX alt=GoGoX, one of Asia’s first mobile app-based logistics services platform operators, has expanded its operations over the years from Hong Kong to mainland China, Singapore, South Korea, India and Vietnam. Image: GoGoX>
GoGoX, which operates as Kuaigou Dache on the mainland, has seen its market value shrink by more than 90 per cent since its Hong Kong trading debut in June 2022. Its share price closed up 6.8 per cent to HK$0.63 on Thursday.
The company – which expects to remain in the red this year, according to its 2022 prospectus – narrowed its losses to 642.9 million yuan (US$90.37 million) in the first half of 2023, from 1.05 billion yuan in the same period in 2022.
GoGoX also went through a major management reshuffle in December, as founder Chen resigned from his chairman role. The company tapped Steven Lam Hoi-yuen, another co-founder and the co-chief executive of GoGoX, as its new chairman.
Hangzhou-based Alibaba’s partial divestment initiative at GoGoX comes amid its preparations for the initial public offering (IPO) of Cainiao Smart Logistics Network, which submitted its A1 filing to the Hong Kong stock exchange last September.
Cainiao aims to raise at least US$1 billion, subject to market conditions, according to sources cited in a Post report that month.
Steven Lam Hoi-yuen, co-founder and co-chief executive of GoGoX, hits the gong during the company’s listing ceremony at the Hong Kong stock exchange on June 24, 2022. Photo: Dickson Lee alt=Steven Lam Hoi-yuen, co-founder and co-chief executive of GoGoX, hits the gong during the company’s listing ceremony at the Hong Kong stock exchange on June 24, 2022. Photo: Dickson Lee>
Alibaba is trying to stop the bleeding with its stake cut, as its initial goal with the GoGoX investment was to gain financial returns through the listing and create synergy with its own services, according to Zhang Yi, founder and chief analyst at Guangdong-based consultancy iiMedia.
“This is still a market with huge demand and many opportunities even with the price wars, similar to those in the bike-sharing and ride-hailing sectors,” Zhang said. “So the bigger problem is more likely to lie within the operation of GoGoX, which will need revolutionary measures to reverse its losses.”
At present, GoGoX is competing in a crowded on-demand cargo delivery services market on the mainland, where its hometown rival Lalatech Holdings operates Huolala. Competition has become more intense in recent years after traditional logistics firms and ride-hailing companies also set up similar app-based courier delivery operations.
Chinese ride-hailing giant Didi Chuxing, for example, started its own intracity freight service in 2020 and launched its autonomous trucking business Kargobot in April last year. Full Truck Alliance, known as China’s “Uber for trucks” and focused on long-haul logistics services, in April launched its Sheng Sheng brand dedicated to same-city delivery.
Huolala currently leads the mainland’s intracity courier delivery services market with a 61 per cent share, according to Frost & Sullivan data cited in the prospectus of Lalatech, which is eyeing a Hong Kong IPO.
Similar to on-demand services like ride hailing, the early stage of competition in intracity freight services has relied heavily on subsidies for users.
That “cash-burning” business model, however, has faced increased scrutiny from regulators, who recently summoned Lalatech for talks regarding drivers’ rights and unfair price cuts.
GoGoX and other courier delivery services providers have also received “reminders” from regulators about their operations in the past year.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.
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