Meituan Shares Sink as Much as 9% After Consumer Council Report

(Bloomberg) -- Meituan’s stock plunged as much as 8.6% in early Tuesday trading, taking the slump over two days to 15% after the Shanghai Consumer Council released criticism late Monday for issues that hurt consumer rights.

The Council blasted Meituan for its practices including refunding problems and misleading content on its mobile app. The company has vowed to submit a rectification report in the near term.

Meituan stock has been sliding since the company became one of the latest targets of the Chinese government’s crackdown on internet companies amid concern the country’s large tech firms have grown too powerful. China’s State Administration for Market Regulation announced late last month that it has launched an investigation into the company’s suspected monopolistic practices.

The shares suffered a fresh blow on Monday after the company’s chief executive officer Wang Xing’s social media posting of a classical poem about book burning by the emperor during the Qin dynasty last week went viral on the internet. Wang later deleted it and said he used the poem in reference to the company’s competitors. The topic with hashtag #MeituanSharePriceSlump# has been read more than 32 million times on popular Chinese blogging platform Weibo.com.

The stock plunge on Monday knocked $1.5 billion off the value of Wang Xing’s 11% stake in the food delivery giant, according to the Bloomberg Billionaires Index.

Meituan may face persisting stock price pressure in the short term, Citigroup Inc. analysts including Alicia Yap wrote in a note commenting on the Shanghai consumer organization’s statement.

User growth at internet platforms may decelerate, possibly causing revenue expansion to slow, while their costs may rise in order to comply with regulatory requirements, after the council said an overemphasis on user traffic by the firms is unhealthy, according to the note.

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