Company / Analytics

Analytics, 11 June 2021

Chinese giant Didi files to go public in the U.S.

Chinese ride-hailing giant Didi Chuxing on Thursday filed to go public in what could be one of the largest tech IPOs of this year. The Beijing company could fetch a valuation upward of $70 billion and plans to use the IPO proceeds to invest in technology, grow its business outside of China and introduce new products.

The IPO: How much is Didi raising?

Didi, which filed under its formal name of Xiaoju Kuaizhi Inc., could fetch a valuation upward of $70 billion, people familiar with the matter said, a number that could stretch even higher amid investors’ ravenous appetite for newly public, high-growth companies.

The company is expected to raise roughly 8% to 10% of the valuation amount in the offering and plans to use the proceeds to invest in technology, grow its business outside of China and introduce new products.

Like Uber Technologies in the U.S., Beijing-headquartered Didi operates a smartphone app where users can hail rides, as well as regular taxis and carpooling services. Didi is known for successfully pushing Uber out of China, winning a bruising price war that ended in 2016 when Uber merged its China unit with Didi in exchange for a stake in Didi. Didi said it sold all its shares in Uber in November and December of last year.

Didi hasn’t yet selected an exchange but said it plans to list its American depositary shares under the symbol DIDI.

Who is Didi?

Didi Chuxing Technology Co., the Chinese ride-hailing behemoth, made its IPO papers public on Thursday, setting the company up to raise billions and begin trading publicly in the U.S. in July.

Didi was founded in 2012 by Cheng Wei, a technology whiz who previously worked at e-commerce giant Alibaba Group Holding Ltd. and merged with a domestic rival in 2015 to gain scale. Now 38 years old, Mr. Cheng was worth $2.8 billion last year, according to Shanghai research firm Hurun Report. He owns 7% of the company’s shares and controls 15.4% of its voting power before the IPO, according to the filing.

Other high-profile investors in Didi include SoftBank Group Corp., which owns 21.5% of the company before the IPO; Uber, which owns 12.8%; and Tencent Holdings Ltd. entities, which own 6.8%.

Didi was most recently valued at $62 billion following an August fundraising round. Bloomberg reported the company could have a $100 billion valuation at the time of its IPO. Unlike Uber, Didi is still heavily invested in making self-driving robotaxis a reality, and recently got approval to test self-driving vehicles in Beijing. Uber sold its nascent self-driving technology business to start-up Aurora Innovation last December.

How has Didi performed so far?

The company reported $21.6 billion in revenue last year. It also posted a profit this past quarter on $6.4 billion in revenue. Specifically, the company reported a net income of $837 million before certain payouts to shareholders, and a comprehensive net income of $95 million for the quarter.

Uber owns 12.8% of the shares in the company after selling its Chinese ride-hailing business to Didi in 2016, while SoftBank’s Vision Fund holds 21.5%. Between 2019 and 2020, Didi’s revenue shrunk almost 10% as the Covid pandemic struck China hard last year. However, before the pandemic, revenue grew 11% between 2018 and 2019. Additionally, revenue has bounced back in the first quarter as the pandemic recovery is in full swing, with 107% growth in Q1 from the previous year’s quarter. Some of the company’s profitability in Q1 can be credited to gains on investments of $1.9 billion related to spin-offs and divestments.

By way of comparison, Uber reported a net loss of $108 million on revenues of $2.90 billion in its first quarter. For all of 2020, Uber’s net losses amounted to $6.77 billion on $11.14 billion in revenue.

How is the competition?

While several rivals have emerged in China in recent years, Didi retains overwhelming dominance in a Chinese ride-hailing market that could be worth $99.5 billion by 2023, according to Daxue Consulting, up from $53.5 billion in 2019. Didi operates in 14 countries outside China, though its home market accounts for most of its journeys.

Didi also runs a logistics service, enabling users to book vans with drivers to transport goods in or between China’s main cities. Earlier this year, Didi was one of several big tech companies fined by Chinese regulators for alleged monopolistic practices. Last month regulators summoned Didi and nine other mobility companies for a warning over their treatment of drivers.

Like other technology companies, Didi is now moving to develop its electric vehicles with help from legacy auto players. Last month it formed a strategic partnership with state-run automaker Guangzhou Automobile Industry Group to develop autonomous EVs. Didi began working on autonomous driving capabilities in 2016 and launched a robotaxi service in Shanghai last year.

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