Once Intra Freight Leader Faces Billion-Dollar Market Value Erosion and Alibaba's sell-off

Hong Kong Stock Exchange recently disclosed that Alibaba (BABA:NYSE; 9988:HK) reduced its stake in GOGOX(Chinese：快狗打车) by 669,400 shares on January 4, decreasing its ownership from 8.04% to 7.93%. Calculated at the average price, the proceeds from this divestment amount to approximately HKD 370,000. 

This marks Alibaba's fifth move within the past two months. Public records indicate that on November 6, 2023, Alibaba announced a reduction of 255,600 shares, followed by divestments of 4,717,600 shares on December 12, 1,369,400 shares on December 15, and 838,400 shares on December 22. The cumulative divestment totals around 7.59 million shares, with an estimated combined proceeds of HKD 48 million based on respective selling prices. 

GOGOX, listed on the Hong Kong Stock Exchange on June 24, 2022, under the code 2246, had a market value of approximately HKD 10.3 billion. During the IPO, Alibaba indirectly held stakes through three companies—Taobao China, Cainiao, and Alibaba Hong Kong Entrepreneurs Fund, L.P—amounting to 12.26%, 2.69%, and 0.02%, respectively. At the time, Alibaba held a total of 92.14 million shares in GOGOX, with an investment value of around HKD 1 billion, representing a 14.97% ownership stake. 

However, shortly after the IPO, Alibaba initiated a series of divestments, with the cumulative proceeds now exceeding HKD 500 million. 

This frequent divestment pattern reflects Alibaba's cautious stance regarding the future prospects of GOGOX.

Established in 2014 as 58 Suyun, GOGOX has evolved into a major online intra-city logistics platform in Asia. Positioned as a "ride-hailing for freight" platform, it is dedicated to providing technology-driven, user-centric logistics solutions. 

Through the acquisition of Hong Kong's GOGOVAN in 2017, the company underwent rebranding and international expansion. Currently, GOGOX's operations span over 340 cities in mainland China, Hong Kong, Singapore, South Korea, India, and Vietnam, with the "GOGOX" brand in mainland China and other Asian countries and regions.

At its Hong Kong IPO, GOGOX was dubbed the "Number One Stock in Intra-City Freight."

According to Tianyancha, from its inception until the IPO, GOGOX secured four rounds of funding. In 2018, its Series A funding reached USD 250 million, and by July 2021, after receiving nearly CNY 100 million in strategic financing, the company was valued at USD 1.5 billion. Investors included 58.com, Alibaba, Cainiao Network, BOCOM International, Chery, GF Capital, and QIANHAI FOF.

As of June 30, 2023, GOGOX had approximately 32 million registered shippers and 65 million registered drivers. In the first half of 2023, the platform completed a total of 12.1 million orders, generating a cumulative transaction value exceeding CNY 1.1 billion. 

Financial data disclosed by GOGOX shows losses of CNY 1.07 billion, CNY 183.8 million, CNY 658.2 million, CNY 873 million, and CNY 1.209 billion from 2018 to 2022. In the first half of 2023, GOGOX incurred a loss of CNY 643 million, a 38.7% YoY narrowing, but the company has yet to reverse its deficit. 

Overall, over the past five and a half years, GOGOX has accumulated losses exceeding CNY 4.6 billion, indicating significant profitability challenges. This is one of the reasons behind Alibaba's divestment.

On August 18, 2023, GOGOX issued a profit warning, suggesting significant challenges in its future operational performance. Public records reveal that in its prospectus, GOGOX noted that, as the intra-city logistics business is still in its initial stages, the company made substantial investments to drive business growth. Considering the business investment plans, it is anticipated that the company will continue to incur losses at least until 2024.

As of the time of writing, GOGOX closed at HKD 0.49 per share, with a market value of approximately HKD 308 million, representing only around 3% of its valuation at the time of listing.