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Shares of Tencent-backed Meituan Dianping plunge on poor earnings

Parcels of Chinese food delivery app Meituan Dianping plunged on Friday after set its first earnings report since its $4.2 billion IPO in September.

During afternoon craft on Friday, Meituan Dianping’s shares dived 11.63 percent. Shares of its pre-eminent backer, gaming and social media company Tencent Holdings, mow down 1.56 percent. Chinese tech juggernaut Tencent committed $400 million during Meituan’s extremely anticipated IPO .

Meituan-Dianping, an online platform with services from subsistence delivery to ticketing, announced that its operating losses tripled to 3.45 billion yuan (approx $497 million) in the June to September caserne compared to a year ago.

Revenue for the three months to Sept. 30 be upstanding 97.2 percent to 19.08 billion yuan and overall gross doings volume grew 40 percent from a year ago.

“Honestly defending, I really like this company … I love their policy, I tried this platform in (the) mainland,” Dickie Wong, research administrator at Kingston Securities, told CNBC’s “Squawk Box” on Friday.

“But if I were an investor, I reckon it’s hard to justify this kind of like 335-billion Hong Kong dollars (approx. $42.8 billion) valuation. It’s big-hearted of hard to justify it at this kind of like revenue growth and also, whopping loss of operating… business.”

Furthermore, Wong added, Meituan’s acquirement of bike-sharing company Mobike was “not a very wise move.”

“The bike renting partnership in China is simply not profitable,” he added.

The results, the first since Meituan Dianping’s bibliography, underscore the challenges facing the firm amid a costly battle in the rations delivery space with rivals such as Alibaba Group’s childbirth platform Ele.me and even ride-hailing firm Didi Chuxing, which is backed by Japan’s SoftBank.

Wong asseverated Alibaba’s platform was the main rival to Meituan “at this moment.” He hand-me-down a Chinese idiom to suggest that when the two parties compete with each other, a third band — likely the consumer in this case — will stand to benefit.

— Reuters bestowed to this report.

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