FAST NEWS: Dada Nexus plummets after company uncovers suspect finances

The latest: Local on-demand delivery platform Dada Nexus Ltd. (DADA.US) announced Monday that a routine internal audit uncovered “suspicious practices … that may cast doubt on certain revenues from the company’s online advertising and marketing services in 2023.”

Looking up: The company said it is working with independent professional advisors to conduct an review to ascertain the financial impact and scope of the suspicious practices.

Take Note: Based on a preliminary assessment, the company estimates that online advertising and marketing services revenues and operating and support costs may have each been overstated by approximately 500 million yuan ($70.4 million) in the first three quarters of last year. That figure would represent about 6% of its previously stated 8.25 billion yuan in revenue for the period.

Digging Deeper: Based in Shanghai, Dada is the intra-city logistics arm of Chinese e-commerce giant JD.com (JD.US; 9618.HK). It operates two major businesses: an intracity delivery services in more than 2,000 Chinese cities; and another service more closely tied with JD.com that lets people order goods from local merchants for delivery to their homes. Dada reported its first non-GAAP profit in the second quarter of last year. But the discovery of overstated revenues and costs may now lead some investors the question whether it really achieved that milestone.

Market Reaction: Dada shares plunged 45.9% to close at $1.705 in New York on Monday after the announcement. The stock now trades at the lower end of its 52-week range.

Translation by A. Au

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