WISH - PDD Stock Alert: Grizzly Research Slams Pinduoduo in New Short Report
2023-09-07 13:20:41 ET
InvestorPlace - Stock Market News, Stock Advice & Trading Tips
Have you downloaded Temu? If so, Grizzly Research believes you may be exposed to dangerous spyware. The market research firm has released a damning short report on Temu’s parent company PDD Holdings (NASDAQ: PDD ).
In short, it believes that the popular shopping app contains hidden spyware that poses a threat to U.S. national security. The report describes PDD, or Pinduoduo, as a “dying, fraudulent company,” raising highly concerning suspicions.
PDD stock is falling today on the news as the market reacts to the evidence brought forth by Grizzly. Shares are likely to keep declining as U.S. investors rush to cut ties with the company.
Does this mean that everyone should be concerned about Temu? Let’s dive deeper into this story and assess what investors should be expecting as the dust continues to settle.
What’s Happening With PDD Stock?
Since Grizzly Research published the report yesterday, PDD stock has been highly volatile. As of this writing, it is down more than 6% for the day. Its current trajectory suggests that a rebound is possible. However, that’s likely due to general market momentum.
Investors shouldn’t interpret its current performance as an indication that the short report is insignificant. More than likely, the market is still adjusting to the firm’s findings.
What exactly did Grizzly’s research team find during its investigation of PDD? There’s a lot to unpack, so let’s dig in.
In the report, Grizzly notes that its staff worked with independent data security experts to closely examine Temu’s code. It found that the app has hidden functions that allow for extensive data exfiltration unbeknown to users, potentially giving bad actors full access to almost all data on customers’ mobile devices.”
The firm also noted that over the last nine months, Temu has been downloaded over 100 million times — but only by users in the U.S. and Europe. It highlights the fact that the app isn’t available in China as further evidence of its spyware concerns.
Many downloads may have happened under nefarious circumstances. Grizzly’s team accuses Temu of using “the most aggressive and questionable techniques to manipulate large numbers of people to install the app.”
The research firm makes its central thesis clear — it suspects that Temu is already selling data it has harvested from users or that it intends to start doing so shortly. Grizzly sees this as the only possible way for it to sustain a business model that is otherwise destined to fail.
It argues that peddling cheap, Chinese made goods is not a functional business model on its own. Wish.com, now ContextLogic (NASDAQ: WISH ), and Shein are notable examples of why that doesn’t work. Grizzly also references a May report from WIRED that found evidence of Temu losing up to $30 per order .
Why It Matters
It’s unclear what will happen now, but an investigation into Temu likely isn’t far away. U.S. regulators have made numerous attempts to crack down on Chinese companies that trade on American markets. If any allegations made by Grizzly are found to be true, PDD stock could easily face disciplinary action, including being delisted.
In the meantime, shares are likely to keep falling as the dust settles and more information about Temu and Pinduoduo comes to light. Investors should prepare for users to start deleting the app as this story continues to circulate, pushing PDD stock down even more.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines .
Samuel O’Brient has been covering financial markets and analyzing economic policy for three-plus years. His areas of expertise involve electric vehicle (EV) stocks, green energy and NFTs. O’Brient loves helping everyone understand the complexities of economics. He is ranked in the top 15% of stock pickers on TipRanks.
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