Sequoia’s Neil Shen Continued to Reduce His Meituan Stake, Cashing Out More Than HK$16.5 Billion in 2021

This is an English adaptation of a FoodBud historical article originally published on October 29, 2021.

On October 28, 2021, the Hong Kong Stock Exchange’s latest disclosure filings showed that Neil Shen reduced his Meituan holding by 2.6746 million shares on October 25.

The transaction price was HK$287.13 per share, implying proceeds of HK$768 million. After the sale, Shen’s latest disclosed holding was 288 million shares, reducing his ownership ratio to 5.29%.

Shen is Sequoia Capital’s global managing partner and a non-executive director of Meituan. Sequoia said the sale was a normal reduction of holdings.

A series of large reductions

Earlier, on October 20, 2021, Shen sold 24.58 million shares in a single transaction, equal to 0.45% of Meituan’s total share capital. Based on that day’s closing price of HK$285.6, the sale would have raised about HK$7.02 billion, the largest of several reductions that year.

On September 7, 2021, Shen, described as Sequoia Capital’s founding managing partner and a Meituan non-executive director, sold 1.5219 million Meituan shares at an average price of HK$259.6849, involving HK$395 million. On September 8, he sold another 100,000 shares at an average price of HK$265, involving HK$26.5 million. Across the two days, the sales generated about HK$422 million and reduced his holding ratio to 5.79%.

Sequoia’s long-term Meituan position

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 in Sequoia’s fourth financing round into Meituan, the cost was only US$6.32 per share.

Meituan’s annual report stated that Neil Shen, Sequoia China funds and Sequoia Capital global funds held interests in one another’s Meituan shares, meaning Shen and Sequoia were acting in concert. At Meituan’s listing, Shen, Sequoia Capital and Sequoia China together held 12.05% of Meituan.

Wind data showed that since 2019, Shen had reduced his Meituan position several times. Although there were also examples of increased holdings, the total volume sold was far higher than the volume added.

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

Regulatory pressure and share-price swings

Earlier in October 2021, Meituan had just gone through a major antitrust penalty. On October 8, China’s State Administration for Market Regulation fined Meituan RMB3.442 billion, equal to 3% of its 2020 domestic sales revenue. It was the largest fine Meituan had received since its founding, and related to the “choose one from two” exclusivity practice.

Since Meituan listed at HK$69 in 2019, its shares first fell below the IPO price, reaching a low of around HK$40. During the pandemic-driven market rally in 2020, the stock rose from around HK$70-80 to roughly HK$450. Antitrust and labor-compliance issues later pushed the price down to around HK$180. After the fine was settled, the price recovered to around HK$290.

Other industry item: Hema tests coffee

In a separate item attributed to 36Kr, Hema Coffee, linked to Alibaba-SW (09988), was said to still be in a localized testing stage. At the time, Hema Coffee had stores in Kunming, Yunnan.

Store menus showed classic drinks such as Americano and latte, as well as Yunnan-flavored coffee products. Prices ranged from RMB15 to RMB27, similar to comparable coffee drinks in the market.

Tech Planet had previously reported that Luckin Coffee achieved overall profitability in May 2021, completing its annual target ahead of schedule and suggesting profit potential in China’s domestic coffee market.

As consumer habits, coffee profitability models and operating models became clearer and more mature, several companies entered the coffee track through self-built brands or investment, including Mixue Bingcheng, Genki Forest and ByteDance. The article argued that entry by large-scale players would activate the broader coffee market.

Hema Coffee stores were attached to Hema Fresh stores, indicating an effort to use Hema Fresh’s operating system to support the coffee business. The coffee stores could also become part of Hema Fresh’s consumption scenario, improving the in-store customer experience.

Note: IPO, shareholding, proceeds and regulatory figures are historical as of the article’s October 29, 2021 publication date.