信息

VNG's investments into Tiki - a lose/win deal?

Nowadays (end of September 2019), according to iPrice Insights and its study called The Map of E-Commerce in Vietnam performed in July 2019, Tiki is on the second position of the leading Vietnamese E-Commerce players, just after Shopee.

As for a reminder, Tiki was founded in 2010 in Ho Chi Minh City and it started its business activities by selling books online, it is only later that the start-up expanded its selling activities to other various products such as fashion, technology, healthcare, and even beauty products. The company performed its first fundraising in 2012 when it got its first funds from the venture capital fund Cyberagent and then Sumimoto. In May 2016, VNG Corporation invested 17 millions USD in Tiki in exchange of 38% of its shares, and thus became the largest shareholder of this e-commerce platform.

However, because of fierce rivalry with Lazada and Shopee and because of the general e-commerce race on the Vietnamese market, Tiki burned about 380 billion VND (16.52 million USD) during the first two years (2016 and 2017) after VNG's investment, which forced Tiki to constantly look for more funds. At the end of 2017, Tiki started receiving its first investments from China's second-largest e-commerce giant – JD.com. This put VNG in a weaker position as a share holder and was perceived as a threat to its leading position.

As a consequence VNG continued to invest in Tiki by giving more than 120 billion VND (approximately 5.22 million USD) to keep its position as the biggest shareholder, however VNG's ownership rate in Tiki felt down to 28,9%, while JD.com already held 22% by the end of 2018, making it the second largest investor in Tiki. It must be emphasized that the reason for this decrease in shares is that VNG somehow lost its focus on keeping its leading position as an investor in Tiki, as it had many other investments that needed attention. Indeed VNG has invested 129 billion VND (5.61 billion USD) in Zion JSC, which operates the Zalo Pay platform, as Zion reported a loss of over 133 billion VND (5.78 million USD) in 2018.

According to the newly released semi-annual financial and according to the National Business Registration Portal Tiki managed to raise and obtain capital twice during the first six months of this year. This continuous money injection from JD.com dramatically changed the shareholder structure and granted it the largest shareholder position with nearly 26% of Tiki's share while VNG's holding automatically shrank to 24.6%.

The conclusion of this unfortunate story of VNG's investments in TIKI is that the recent development of online retail in Vietnam started a fierce confrontation between competitors on this fairly new market. This rivalry for the highest position on the markets attracts the attention of numerous investors and their funds, as they perceive the ongoing rivalry on the Vietnamese online retail market as an opportunity to seize the largest possible share of the market. It is naturally expected that there will winners and losers among the biggest players such as Lazada, Tiki and Shopee, but the aim of this article is to make our readers aware of the fact that even investors can become losers even they pour huge amounts of money into such a giant as Tiki, even if the company into which they pour money is still on a leading position.