On January 8th local time, the stock price of DADA. US plummeted by over 45%, with its latest market value reaching $447 million.
Yesterday evening, JD Group suddenly announced that its consolidated subsidiary, Dada, had discovered some questionable behavior during its regular internal audit process, which may raise questions about Dada's online marketing service revenue and operating support costs for the first three quarters of 2023. The audit committee under Dada's board of directors has decided to conduct an independent review, which will be assisted by independent professional consultants.
In response to this matter, Dada Group has also issued relevant announcements stating that suspicious practices have been discovered during routine internal audits, which may lead to doubts about the company's revenue from online advertising and marketing services in 2023. Based on the preliminary assessment and the results of the independent review described below, the company currently estimates that the revenue and operational support costs for online advertising and marketing services in the first three quarters of 2023 will be approximately RMB 500 million each, which may have been overstated. In addition, the revenue guidance provided by the company for the fourth quarter and full year of 2023 should no longer be relied upon until further notice.
Dada Group also stated that the audit committee ("Audit Committee") of the company's board of directors, after reviewing the currently available information, will conduct an independent review to determine the financial impact, scope of suspicious practices (if any), and root causes, which are most beneficial to the company and shareholders. The audit committee is seeking and will receive the assistance of independent professional consultants, including a legal accounting firm that is not a company auditor and an international law firm. The company will update the progress of independent review in a timely manner in accordance with applicable rules and regulations.
According to public information, Dada is a real-time delivery and retail platform under JD.com, with two core businesses: JD Home and Dada Express. It was established by Kuai Jiaqi in Shanghai in 2014. In April 2016, JD Group exchanged JD Daojia's assets, JD Group's business resources, and $200 million in cash for approximately 47.4% of the shares of New Dada, becoming the single largest shareholder.
In June 2020, Dada Group was listed on the NASDAQ Stock Exchange in the United States, becoming the "first stock in real-time retail". In March 2021, JD.com increased its holdings of Dada by $800 million, with a 51% stake after the increase. In February 2022, JD.com increased its stake in Dada Group with $546 million in cash and several strategic resources as consideration, increasing its shareholding to approximately 52% and becoming the largest shareholder of Dada Group.
In August 2022, the founder of Dada stepped down and the JD.com system took over. At that time, Dada Group announced that the board of directors had confirmed Kuai Jiaqi's retirement and resignation as CEO and chairman of the company's board of directors. After Kuai Jiaqi left, He Huijian, the former Vice President of Dada Group, was promoted to the position of President of Dada Group, responsible for daily work. The position of Chairman of the Board will be held by JD Retail CEO Xin Lijun, who will also be appointed as a director of Dada Group.
In the past year, JD Group's organizational structure and executive team have undergone significant adjustments, and Xin Lijun has gradually withdrawn from the front line. In December 2023, Xin Lijun, Chairman of Dada Group, and Chen Zhaoming, CFO, both resigned. Shan Su, CFO of JD Group, succeeded Xin Lijun as Chairman of Dada Group's Board of Directors and a member of the Nomination Committee. Mao Jun, Head of Investor Relations at JD Logistics, took over as CFO.
The International Financial News reporter noticed that since 2017, Dada Group has been operating at a loss. According to data from Tonghuashun, from 2017 to 2022, Dada suffered losses of 1.449 billion yuan, 1.878 billion yuan, 1.67 billion yuan, 1.705 billion yuan, 2.471 billion yuan, and 2.008 billion yuan, respectively.
In November 2023, Dada Group released its third quarter report for 2023, which showed that its total revenue in the third quarter was 2.8666 billion yuan, an increase of 20.4% year-on-year from 2.3801 billion yuan in the same period of 2022, but lower than its previous estimate of a year-on-year increase of 21.8%. In terms of net profit, Dada's net loss in the third quarter was 166 million yuan, a decrease of 63.43% from the net loss of 454 million yuan in the same period last year. In the first three quarters of 2023, Dada Group's revenue was 8.232 billion yuan, with a net loss of 675 million yuan.