People familiar with the matter said that social platform Xiaohongshu is expected to record a net profit of US$500 million this year, far exceeding the profit of less than US$50 million the company expected at the beginning of the year, indicating that the company's e-commerce business is paying off. The strong performance raises hopes that Xiaohongshu will launch a new round of financing or eventually launch an initial public offering (IPO). Xiaohongshu has received support from some heavyweight investors, including Alibaba Group, Tencent Holdings, Temasek Holdings and GGV Capital.
According to people familiar with the matter, the company's last financing was in 2021, when it raised US$500 million at a valuation of US$20 billion. However, in a private market stake sale last year, Xiaohongshu's valuation was said to have dropped to between US$10 billion and US$16 billion.
Like many privately held companies, Xiaohongshu is not obliged to disclose its financials and therefore is not subject to independent audits. Still, many startups share their results with backers and potential investors.
To increase e-commerce sales, Xiaohongshu uses its rich content to attract consumers to shop on the platform. As users scroll through videos and photos, they can purchase tagged products with just a few clicks. Xiaohongshu is also focused on getting more advertising revenue from brands, after announcing plans to close its own stores in September.
As of press time, Xiaohongshu has not commented on this.