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Data Sheet—Burning Cash With China’s Meituan-Dianping Delivery Service

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Consumers in China use Meituan-Dianping to order all manner of delectables: shrimp dumplings, spicy chicken feet, hairy crab. A few taps on the app and, presto, one of Meituan’s more than 500,000 drivers is at your door. The service also is handy for booking a haircut, hotel, or movie ticket, and checking restaurant reviews. More than ten million people use Meituan each day, making it China’s largest on-demand online services provider.

There is one thing Meituan does not deliver (at least not yet): profits. The Beijing-based venture has lost money in each of the last three years; in 2017 it burned through nearly $3 billion. And yet, when Meituan lists in Hong Kong next week, it is expected to seek a share price implying a valuation of more than $45 billion.

Until only a few months ago, there was nothing odd about this. Global investors were happy to fork over billions for money-losing Chinese tech startups with convoluted ownership structures and murky disclosure practices. After all, wasn’t China’s burgeoning middle class one of the most profound developments of the 21st century? Shouldn’t investing companies like Meituan be considered an opportunity comparable to the chance to buy Amazon back in 1997?

Lately answers to such questions don’t seem so obvious. China tech stars have had a miserable summer—even as their American counterparts soar to record highs. Shares of China’s two tech giants, Alibaba Group and Tencent Holdings, have tumbled 20% from peaks in June—the former hurt by concerns about declining profits and the latter dragged down by a government crackdown on the sale of online games. JD.com’s shares, already weighed down by investor concerns about weak earnings, have plunged to a 19-month low following founder Richard Liu’s arrest in Minnesota this week on rape charges.

Xiaomi, whose June debut on the Hong Kong exchange is the year’s biggest China tech listing so far, has slumped back to its IPO price. Pinduoduo, China’s third-largest e-commerce platform, has languished since listing on the NASDAQ in July—and won’t benefit from recent reports that its site is a favorite of animal traffickers selling endangered pangolins. Meanwhile, China’s ride-hailing powerhouse, Didi Chuxing, faces regulatory scrutiny and public outrage after a driver from one of its car-pool services raped and murdered a female passenger.

It’s tempting to dismiss all these mishaps as unrelated—a series of unfortunate events. But it feels to me like there’s something bigger going on. Over the past three months, China’s tech sector has become a much less forgiving place. The economy is slowing, consumers are hunkering down. The U.S.-China trade war has created a climate of uncertainty and Beijing is squeezing China’s tech sector more tightly than ever. As the industry matures, the advantage is shifting from companies with visionary founders who spin fancy yarns about growth and limitless opportunities to those run by solid execution-oriented managers operating in transparent governance structures.

Clay Chandler
@claychandler
clay.chandler@timeinc.com

NEWSWORTHY

Zoom in. The super secretive big data analysis firm Palantir Technologies is getting closer to going public, Bloomberg reports. Palantir, which is turning profitable according to the report, will rely on Morgan Stanley to run the deal.

Zoom out. Following in the footsteps of Nikon, its chief rival, Canon unveiled a new mirrorless, full-frame camera dubbed the EOS R. Rivals led by Sony have been winning over a growing number of professional Nikon and Canon photogs with cameras based on the lighter, more versatile mirrorless technology.

Hail Mary. Even if you’ve cut the cord to cable TV you will be able to watch the Super Bowl next year. CBS says it will stream the 53rd NFL championship game via its website and apps even to “non-authenticated” viewers.

Oversharing. As Facebook COO Sheryl Sandberg and Twitter CEO Jack Dorsey head to Washington today to discuss election attacks, a poll from the Pew Research Center shows people feel they have little control over social media services. About 57% of people over 18 said they have little control over what shows up in their feeds and 28% said they have no control. Only 14% believed they had a lot of control.

Shop ’til you drop. It has pretty pictures of all kinds of stuff, so why not click to buy? Facebook’s Instagram service is working on a dedicated shopping app to be called IG Shopping, The Verge reports. The company declined to comment.

Two horse race. In an up and down day in the stock market, Amazon briefly reached a valuation of more than $1 trillion but closed just below the mark. Still, Wall Street Journal financial columnist Dan Gallagher wagers that the e-commerce giant will exceed Apple’s $1.1 trillion value soon.

Can’t stand losing you. I am a major user of the note-taking app Evernote, but the company seems to be in a bit of turmoil—making me nervous about the 2,999 bits of information I have stored there as of this moment. The chief financial officer, chief technology officer, chief product officer, and head of HR have all left recently, TechCrunch reports. “Evernote is in a death spiral,” an anonymous tipster tells the website. The company says its app is still being downloaded millions of times a quarter.

FOOD FOR THOUGHT

As mentioned, Amazon’s stock market value is almost $1 trillion, making the new Forbes cover story with Jeff Bezos rather timely. The piece by Randall Lane covers all the usual ground about the company’s e-commerce and cloud data center businesses. There is also more detail about Amazon’s new healthcare initiative in partnership with J.P. Morgan Chase and Berkshire Hathaway.

Bezos is adamant about Amazon’s intentions here. “This is a nonprofit initiative, as you guys know. It’s very different,” he interjects, before even a full question can be asked about it. Buffett, for his part, concurs, having explained to me a few months ago: “We were deluged by people after the announcement who said, ‘We want to join in.’ And we said, ‘You don’t have to join in. Steal everything we get, if we get anything.’ ” The “if we get anything” is key. “Like Columbus leaving, we don’t know where the hell we’re going exactly,” Buffett added. “But we hope there’s another continent out there and we don’t go off a shelf at some point.”

But even if they do sail off the Earth, Bezos wins, as Amazon burnishes its skills accounting for around one fifth of the domestic economy. While any breakthroughs developed with Buffett and Dimon “would still be inside that nonprofit entity,” Bezos says, “each of the companies can pursue their own initiatives.” Bezos has already started. In June, Amazon agreed to pay almost $1 billion for PillPack, a startup that delivers pre-packaged daily prescription envelopes. It’s everything that Amazon is good at: fulfillment, customization and dependability. And it’s another toe in the healthcare pool.

IN CASE YOU MISSED IT

Sabotage in Space? Russians Claim Someone Drilled a Hole in an International Space Station Capsule By David Meyer

Huawei Announces the World’s First 7-Nanometer Chipset, Beating Apple to the Punch By Eamon Barrett

‘We Are Now Out of Time.’ Theranos Is Finally Going to Dissolve By David Meyer

AMD’s Stock Hits 12-Year High as Rival Intel Hits Speed Bump By Kevin Kelleher

Could Twitter Dump Trump? Under the Right Circumstances, Twitter Legal Chief Says By Glenn Fleishman

BEFORE YOU GO

Someone in Hollywood seems to have decided that pop music is the way to go. Already anticipating Bradley Cooper’s directorial debut starring Lady Gaga, A Star Is Born, and Bryan Singer’s Freddie Mercury biopic Bohemian Rhapsody, now comes word of the Natalie Portman vehicle Vox Lux about a fictional troubled pop star called Celeste. As the late, great David Bowie might say: Is it any wonder you are too cool to fool?

This edition of Data Sheet was curated by Aaron Pressman. Find past issues, and sign up for other Fortune newsletters.