Sequoia Capital’s Neil Shen Cuts Meituan Stake, Cashing Out HK$422 Million

This is an English adaptation of a FoodBud historical article originally published on September 17, 2021.

Neil Shen, founding and managing partner of Sequoia Capital and a non-executive director of Meituan, reduced his Meituan holdings over two consecutive trading days in September 2021, cashing out about HK$422 million in total. His shareholding fell to 5.79%.

Two-Day Share Sale

On September 7, 2021, Shen sold 1.5219 million Meituan shares at an average price of HK$259.6849 per share, for proceeds of HK$395 million.

On September 8, 2021, he sold another 100,000 shares at an average price of HK$265 per share, for proceeds of HK$26.5 million.

Across the two transactions, the total cash-out was approximately HK$422 million.

Sequoia’s Long History With Meituan

Sequoia Capital became Meituan’s Series A investor in 2010 and was the only investor in that round.

According to Meituan’s prospectus, Sequoia invested in September 2010 at a cost of US$0.00882 per share. Even by Sequoia’s fourth round of Meituan financing, its cost was only US$6.32 per share.

Wind data showed that since 2019, Shen had reduced his Meituan holdings multiple times. Although there were also some purchases, the total volume sold was far higher than the amount added.

From the second half of 2020 through the first half of 2021, Shen made several large disposals, cashing out nearly HK$300 million in that period. On July 21, 2020, he sold 712,900 shares at an average price of HK$197.72, realizing HK$141 million. On April 27, 2021, he sold 475,700 shares at an average price of HK$300.39, realizing HK$143 million.

Regulatory Pressure Around Meituan

On August 30, 2021, Meituan disclosed in its second-quarter earnings report an update on the antitrust investigation by China’s State Administration for Market Regulation.

Meituan said it could not predict the status or outcome of the investigation at that stage, and that it might be required to change business practices and/or pay a significant fine.

The filing stated that in April 2021, the State Administration for Market Regulation had launched an investigation into the company under China’s Anti-Monopoly Law. As of the reporting date, the investigation was still ongoing, and Meituan said it was actively cooperating.

On August 9, 2021, The Wall Street Journal reported, citing people familiar with the matter, that Chinese antitrust regulators were preparing to fine Meituan about US$1 billion for allegedly abusing market dominance and harming merchants and competitors. The report said a penalty decision could be announced within weeks, and that Meituan would be required to rectify its business and end “choose one of two” exclusivity practices.

On August 30, 2021, the State Administration for Market Regulation also said that, under its administrative guidance, eight shared-consumption brands and operators — Hello, Qingju, Meituan, Guai Shou, Xiaodian, Laidian, Jiedian and Soudian — had made rectifications, with price increases in the sector effectively curbed and posted pricing becoming more transparent and standardized. The regulator also said it was reviewing Soudian’s acquisition of Jiedian and investigating Meituan’s acquisition of Mobike for failure to make a required filing.

Ongoing Disputes With Ele.me

Meituan and Ele.me were also involved in a series of legal disputes.

On September 13, 2021, reports said the Qingdao Intermediate People’s Court had ruled in a case brought by Ele.me against Meituan entities Beijing Sankuai Online Technology Co., Ltd. and Beijing Sankuai Technology Co., Ltd. The court ordered Meituan to immediately stop the internet-related unfair competition behavior at issue and compensate Ele.me RMB1 million for economic losses and reasonable expenses.

In another recent case, after Ele.me was accused of forcing merchants into “choose one of two” exclusivity and closing stores that refused, a court in Chuzhou, Anhui ruled that Ele.me should compensate Meituan RMB80,000.

The Chuzhou Intermediate People’s Court found that Ele.me’s forced exclusivity practice showed clear subjective malice in unfair competition, damaged merchants’ commercial interests, severely restricted consumer choice, and seriously obstructed and disrupted the normal operation of other food-delivery platforms such as Meituan Waimai.

Note: share-sale, investment-cost, IPO/prospectus, fine and forward-looking regulatory figures are historical as reported in September 2021.