"Could be one of the largest tech IPOs of this year."
- Comments from CNBC
DIDI Chuxing, a Chinese ride-hailing giant, launched on the NYSE on June 30th. It managed to raise $4.4 billion in its U.S debut. The initial offering price was $14 per share. After its first day of trading it closed with a modest 1% increase, at $14.14.
The company filed its documentation to go public on the 11 June 2021. According to PitchBook's data, DIDI's last round of funding in August 2020 suggested a valuation of $62 billion and Reuters reports that it could potentially reach $100 billion.
What is DIDI
Founded in 2012, DIDI is currently the dominant ride-hailing company in Mainland China with approximately 90% market share and ranks second globally with 32.4% of worldwide market share.
According to their Prospectus Summary in the IPO filing, the firm aims to "make life better by transforming mobility" and has been operating in nearly 4000 cities across 15 countries. For the past 12 months ending March 31 2021, 493 million active users and 15 million active drivers have used their platform. For the past 3 months ending March 31, 2021, the platform sales was US$1.7 billion.
DIDI also operates other business in the mobility related field, including vehicle charging networks, shuttle bus services, bike rentals, autonomous driving and a electric car in collaboration with Chinese auto manufacturer BYD Co.
DIDI vs Uber
Uber and DIDI are the two major dominants forces in the industry with 37.2% and 32.4% market share respectively . Back to 2016, DIDI won the war against Uber's China unit, and Kuaidi, an Ablibaba-backed competitor, and eventually bought Uber's China business. Currently both companies hold interest in each other with Uber also owning a 12.8% stake in DIDI.
View of the future
While Uber sold its auto driving business to Aurona Innovation in 2020.
DIDI continues to invest heavily in autonomous driving, expanding its interests beyond the core ride-hailing business.
During 2020, both companies were affected by the COVID-19 pandemic but DIDI has recovered fast. While the revenue decrease of Uber was 14.6% in 2020, DIDI's was only 8.5%.
In Q1 2021, DIDI reported $6.4 billion in revenue, doubling the number from the same period in 2020. By comparison, Uber posted a net loss of $108 million on revenues of $2.9 billion in Q1 2021.
Cash burner turns profitable
Since it was founded in 2012 DIDI has been posting losses every year, however for the first time it posted a net income of $837 million in Q1 2021, which can be credited to gains on investments of $1.9 billion related to spin-offs and divestments. The revenue in Q1 2021 was $6.4 billion, which increased by 107% in comparison with Q1 2020.
Major Risk Factor of the IPO
According to Reuters, recently China's market regulator, the State Administration for Market Regulation began an antitrust probe into the IPO-bound DIDI, to investigate whether DIDI used any competitive practices that may have squeezed out smaller rivals unfairly.
Key firms that could benefit from the IPO
• SoftBank Group - 21.5% shares ownership, meaning $15-21.5 billion
• Uber (UBER.us) - 12.8% shares ownership, meaning $9-12.8 billion
• Tencent (0700.hk) - 6.8% shares ownership, meaning $4.8-6.8 billion
Kalin Tsenov has a strong research background in economics with specific interests in Geopolitics and its impact on the Financial Markets. He joined FXCM in 2018 after obtaining a Bachelor's Degree from Leeds Metropolitan University. Initially starting as a Business Analyst in the Payment Solutions department, he is currently a…