Meituan founder counts cost of $2bn social media blunder
For Chinese tech entrepreneur Wang Xing, a late-night post of an ancient poem on social media may have proved to be a $2.1bn mistake.
Shares in Meituan, China’s biggest food delivery platform, tumbled about 14 per cent in Hong Kong last week after its founder shared four stanzas written 1,000 years ago by poet Zhang Jie. Investors were quick to interpret Wang’s nod to the poem, which was originally a criticism of a Tang dynasty emperor, as a veiled attack on Chinese President Xi Jinping.
As of the close of Monday, Wang’s personal fortune had fallen by $2.1bn to $18.8bn following the post.
The episode underscores the chill that has descended on China’s tech sector. Rival Alibaba, whose founder Jack Ma has largely disappeared from public view since last year, was fined a record $2.8bn last month for abusing its market dominance. The $37bn initial public offering of Ma’s fintech unit Ant Group, which would have been the world’s biggest, was squashed by authorities at the last minute in November.
Online commentators have been quick to draw parallels between Meituan, which also faces an antitrust probe, and Ma’s troubles. The crackdown on Ma’s empire followed public criticism by the internet billionaire of China’s regulators and state-owned banks.
Meituan faces a fine of up to Rmb11.5bn ($1.8bn) if regulators judge it to have engaged in anti-monopolistic practises.
Wang, who Chinese state media has previously dubbed “the poet entrepreneur”, had become known for his daily musings on social media on subjects ranging from praise of sweet potatoes to the health of legendary US investor Charlie Munger.
Those ruminations have ceased since he offered an explanation of the poem he posted titled ‘Pits for burning books’. The poem mocked the actions of China’s first emperor who attempted to quell dissent among intellectuals by burning books, only to have his dynasty overthrown by non-intellectuals. Prior to taking control of China in 1945, Mao Zedong penned the same poem comparing himself to these revolutionaries.
Poems have throughout Chinese history been an outlet for dissidents to voice their discontent but Wang claimed his post simply referred to Meituan’s ecommerce rivals.
The Meituan chief executive has a history of run-ins with China’s regulators.
Fanfou, the Twitter-like platform on which he posted the poem this month, was set up by Wang in 2007. The platform gained a reputation for its freewheeling exchange of ideas before authorities grew uncomfortable and forced it offline in 2009.
Fanfou later re-emerged in a censored format but is now accessible only to a small group of early users.
After Fanfou’s targeting by regulators, Wang told a Chinese journalist he hoped to avoid similar problems in the future. “You can’t make a mistake and not learn a lesson,” he said. “Even if you think you understand, the rules are always changing.” He later admitted he was not good at government relations.
Competitors describe Wang, who was educated in the US, as confident and determined. Subordinates say he is curious, direct and works elbow-to-elbow among Meituan employees. At a press conference in 2011, he showed a Meituan bank account containing $62m to prove the group was solvent.
“He’s like Jeff Bezos, very focused on product and pragmatic,” said Li Chengdong of ecommerce think-tank Haitun. “He’s a workaholic, he doesn’t really enjoy life much.”
Wang’s penchant for experimenting is apparent at Meituan. The company started as a copy of group-buying site Groupon but now offers everything from movie tickets to payments.
“They churn through ideas and executives are disciplined about killing off businesses that are not working,” said one person close to the company. “They know what it looks like when it works.”
The scrutiny comes as Meituan invests heavily in building out its grocery delivery business, pushing it to an Rmb2.2bn loss in the fourth quarter. The company raised $10bn in debt and equity last month.
A likely antitrust fine may not be the biggest challenge at Meituan with the group also facing criticism of its treatment of its estimated 1.5m riders who deliver meals across Chinese cities.
Like US peer Uber, Meituan does not directly employ riders or provide them with benefits. Chinese media reports have focused attention on the harsh fines riders receive for late deliveries and other infractions. Last month, a top labour official in Beijing went undercover as a Meituan driver and earned only Rmb41 for a 12-hour delivery shift.
Robin Zhu, an analyst at brokerage Bernstein, points to a trial being run by the city of Nanjing that requires full-time delivery drivers to receive benefits such as social insurance. Any move to roll this out nationwide would hit Meituan’s cost structure, Zhu said.
Wang appears to be taking steps to appease regulators, telling investors in March that Meituan may begin to break out its delivery fee structure to help “the regulatory authority . . . understand the mechanism better”.
He has also tried to solve Meituan’s problems by opening up his cheque book. In recent weeks, Wang has donated Rmb50m to his former middle school in his home province of Fujian and made a big donation to his alma mater, China’s prestigious Tsinghua University.
“We’ll play by the rules. We will do our best to be a good corporate citizen,” Wang said in March.
Additional reporting by Nian Liu in Beijing