Didi is about to go public in the largest US share offering by Chinese companies since Alibaba.
China could be the world’s largest ride-hauler according to public filings, New York City could have it as early as WednesdayReutersTheWall Street JournalReports stated that Didi had set the price for shares at $14 per share, raising approximately $4.4 billion. This makes it the largest Chinese IPO in America.AlibabaAccording to Dealogic, there was a $25 billion offer in 2014.
According to reports, the valuation would be more than $67 million. Didi didn’t respond to a request for comment.
Political and regulatory problems
Didi, the force of Uber to leave mainland China five years ago, is now listed on Wall Street in a delicate moment. China’s regulators have been looking into the company, as the sector is currently undergoing a historic crackdown.
The ride-hailer was among 34 companies that were summoned in April to meet with the State Administration for Market Regulations (SAMR). There, executives were instructed to end any anti-competitive behavior. They also received an order to conduct internal inspections.
Reuters reported this month that Didi was under investigation for antitrust issues. According to anonymous sources, Didi was being investigated by SAMR over whether it “used any competitive practices which squeezed out smaller competitors unfairly.”
Didi stated in a statement that it would not comment on speculations unsubstantiated from unnamed sources. CNN Business reached out to SAMR for comment but did not receive any response.
The company is making waves in New York amid high tension in US/China relations.
Many major Chinese tech companies trade in the United States including JD.com (JD) and Alibaba (BABA). However, the market has become more volatile over the years. A flurry of Chinese companies that are listed on Wall Street recently held secondary offers in Hong Kong to establish stronger roots in their home country. Some cited worsening regulations in the United States. Some, such as China Mobile and China Telecom have been removed from the US exchanges.
According to Refinitiv data provider, $12 billion was still raised by Chinese companies through US listing in 2020, despite the tensions. In 2021, Chinese companies have raised nearly $8 billion. This is more than three times the amount raised in the same period last year.
Didi is emblematic of both trends. According to Dealogic, it will be one of the 10 top US listings in the last decade and the fourth largest US IPO by any Chinese company.
According to someone familiar with the matter, the company has been looking into Hong Kong dual listing.
Didi is omnipresent in China with 377,000,000 active users per year in China alone.
The company was established in Beijing by Cheng Wei (an ex-manager at Alibaba), who in 2012 created a taxi service provider called “Didi Dache,” meaning taxi-hailing in Mandarin.
Didi quickly won the support of heavyweights like Apple (AAPL), SoftBankSFTBF) and AlibabaBABAIt also defends its rivals. It acquired Kuaidi Dache in 2015, which was effectively knocking out an opponent. Horse out of the race. Shortly thereafter, the new company combined its flagship app and renamed it Didi Chuxing.
Didi also purchased Uber’s China operation in 2016, ending the US firm’s presence there. Travis Kalanick, the former Uber CEO, acknowledged Didi’s “fierce competitor” and agreed to let the two companies trade stakes. (Didi sold its stake in Uber ( UBER) in the latter part of last year. Didi still holds a 12% stake in Uber.
Didi has expanded to offer many services such as ride-hailing and bike-sharing.
The company is now the largest global mobility platform with users in China, 15 other countries, and Russia.
It is still heavily dependent on its home market, with more than 93% of its sales coming from China.
This is changing, the company says. Didi stated in a Securities and Exchange Commission filing that it would use a third to expand its reach outside China.
Jean Qing Liu and Will Wei Cheng, who are the CEO and president respectively, sent an email to their investors.
A third of the funding will go towards developing its technology in areas like autonomous driving and electric vehicles. The remainder will be used to develop new products and services or make strategic investments. Cheng and Liu stated in their letter that they were looking into new areas like “intra-city cargo, community buying, and food delivery.”
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Didi, like many other startups, has struggled for years to make a profit despite generating billions of dollars in revenue.
It managed to reverse that trend this year and earned approximately $800 million in net income during the March quarter.
Jim Breyer, the founder, and CEO of Breyer Capital said in an email that “Didi” is an industry-leading, founder-led innovator. “I was privileged to witness their leadership from the time I first invested many years ago. And I look forward to their next chapter.”