Missfresh Ltd. (NASDAQ: MF), a former trailblazer in China’s online grocery sector, is making a daring comeback after a tumultuous journey. The company is undergoing a metamorphosis, accompanied by an infusion of new funds, in a bid to emerge stronger from its past struggles. However, skepticism looms over its fresh identity and strategic choices.
In a strategic move to resurrect itself, Missfresh recently announced its plans to sell 5.4 billion Class B shares for $27 million to two investors. This transaction would hand the new investors an 88% stake in the company, thereby valuing Missfresh at approximately $30 million. Founder Xu Zheng, who will retain his position as Chairman and CEO, will be entrusted with the voting rights of the new investors. Simultaneously, Missfresh disclosed its acquisition of Mejoy Infinite, a Hong Kong-based digital marketing firm, for $12 million.
While this valuation of $30 million represents a significant leap from Missfresh’s previous market capitalization of a mere $4 million, it still pales in comparison to the company’s multibillion-dollar valuation during its New York IPO just two years ago. Nonetheless, this strategic move fueled a substantial surge in Missfresh shares, propelling its market capitalization to $15.6 million and elevating its stock above the crucial $1 mark, safeguarding it from potential Nasdaq delisting.
The acquisition of Mejoy Infinite holds the key to Missfresh’s revival strategy, positioning digital marketing as a pivotal component. This venture complements Missfresh’s private label food business, launched in January of the previous year, aimed at revolutionizing local retail. Missfresh’s journey so far has been marked by the discontinuation of its flagship distributed mini-warehouse operations, a 60% drop in revenue, and the shuttering of multiple business divisions.
The company’s challenges were further exacerbated by its cost-intensive delivery model, fierce competition, and a revenue overstatement scandal in 2021, leading to layoffs and executive departures. The looming threat of Nasdaq delisting and financial instability prompted Missfresh’s strategic reboot.
However, doubts persist regarding the efficacy of its new digital marketing endeavor in reversing the company’s fortunes. Mejoy Infinite, founded in 2018, remains enigmatic, with limited available information about its financials and operations. This lack of transparency raises questions about its ability to restore Missfresh’s former glory. Founder Xu Zheng’s limited experience in digital marketing adds to the skepticism, given his background in Lenovo’s notebook business and agriculture.
As Missfresh navigates its turnaround, the company’s credibility hinges on Xu’s leadership and the effectiveness of its strategic choices. The company’s management team remains small, and internal control systems are crucial to preventing future missteps. Despite the initial stock surge, Missfresh’s price-to-sales ratio remains low, reflecting continued uncertainty about its transformational journey. As the initial enthusiasm wanes, the true test of Missfresh’s revival lies ahead, and the market’s response remains uncertain.