By Summer Zhen

HONG KONG (Reuters)

Concentrated bets on popular Chinese e-commerce giant PDD Holdings may have led to billions of dollars in losses for hedge funds following a crash in its shares after downbeat comments from executives.

U.S.-listed shares in PDD, owner of low-priced retailer Temu, plummeted 33% this week and 30% in the third quarter.

BY THE NUMBERS

Global hedge funds held 102.8 million shares of PDD at the end of June, up from 91.7 million shares the previous quarter, according to an estimate by WhaleWisdom, a website monitoring quarterly U.S. 13F filings.

It is unclear if hedge funds changed their investments since then, but Reuters’ calculations show the 30% fall in PDD shares from late June to August 29 wiped out about $4 billion from those positions.

Some of Asia’s largest hedge funds, including billionaire Zhang Lei’s HHLR Advisors, Tairen Capital, and Greenwoods Asset Management, were among the major investors as of June 30, according to WhaleWisdom.

David Tepper’s Appaloosa Management owned 1.94 million shares of PDD at the end of the second quarter, worth more than $250 million.

THE CONTEXT

PDD missed market estimates for quarterly revenue on Monday. During the earnings call, the company stated revenue growth would face pressure due to intensified competition and external challenges, with no plans for dividends or share buybacks.

WHY IT’S IMPORTANT

PDD has been a top pick for many funds investing in China, as its budget product platform is one of few firms still delivering growth and expanding globally amid the economic downturn.

The unexpected bearish guidance, coupled with the stock slump, has further dampened sentiment toward struggling Chinese equities, dragging down tech and consumer shares.

KEY QUOTE

“PDD was a crowded long position for many caliber of clients,” said Andy Maynard, global head of equities at China Renaissance Securities. “I’m sure the 30+% selloff has been difficult for all types of funds.”

“In terms of the guidance, it was really poor… Overall, it will make some investors as pessimistic as ever, likely leading to a narrowing of their portfolios into names they trust and see future growth from,” he added.