Here's how much Uber, Softbank and Tencent can possibly gain from Didi’s IPO — the largest Chinese share sale since Alibaba
- The Uber of China, Didi Chuxing, has officially filed to go public in the US stock market.
- Analysts peg its valuation to be anywhere between $70 billion to $100 billion, which could spell lucrative returns for its three biggest shareholders — Uber, SoftBank, and Tencent.
- The company did not specify which exchange it intends to trade on, just that it expects to list under the ticker symbol DIDI.
AdvertisementChina’s ridesharing behemoth, Didi Chuxing, is finally ready to go public after years of speculation and rumours. Not only will this bring in a fresh inflow of capital for the taxi-hailing service, but it’s also good news for its shareholders — Uber, SoftBank and Tencent — with their stakeholding set to become more lucrative.
Source: Securities and Exchange Commission (SEC) filings, calculations by Business Insider India
|Shareholders in Didi Chuxing||Percentage of stake||Potential value|
|SoftBank Vision Fund||21.5%||$15-21.5 billion|
According to news agency Reuters, Didi could possibly rake in around $10 billion at a valuation of $100 billion as it launches its initial public offering (IPO) in the US stock market. Meanwhile, the Wall Street Journal and Bloomberg peg the ride hailing app's valuation at around $70 billion.
Either way, the listing would be the biggest Chinese share offering in the US since Alibaba raised $25 billion in 2014.
Didi had acquired its rival Uber’s business in China in a complicated transaction worth $35 billion in 2016. Both companies acquired shares of the other. However, Didi sold off all its shares in Uber between November and December, last year.
Uber, on the other hand, has only diluted 6.3% of its stake in Didi, since its exit from China.
Here’s how Didi plans to use the IPO money
Source: Securities and Exchange Commission (SEC) filings
|Use of funds from IPO||Percentage of funds from IPO|
|Invest in technology — including shared mobility, electric vehicles, and autonomous driving technology||30%|
|Grow presence in international markets outside of China||30%|
|Introduce new products and expand existing offerings||20%|
|General corporate purposes — including working capital needs, M&As etc.||20%|
Didi Chuxing vs Uber — competitors with a stake in each other’s business
Didi Chuxing is not only known as the Uber of China, but it actually beat the US-based ride hailing giant in the country.
When Uber went public in 2019, its share price began to slide almost immediately. Lyft, another US-based ride sharing company, also saw its shares slip after making its stock market debut.
Moreover, these companies also lost a lot of money in 2020 because of the COVID-19 pandemic drumming down demand. Uber’s revenue fell 14.6% from in 2020, whereas Lyft saw a dive of 33%. The impact on Didi was relatively muted with revenue only taking a hit of 8.5%.
|Company||Percentage drop in revenue during 2020|
Didi’s profit is a one time windfall — but it's hoping diversification will finally bring it out of the red
Didi Chuxing, unlike its counterparts, reported a profit for the three months of 2021. But it wasn’t because its business grew. The bottomline seems to be cushioned “primarily due to the deconsolidation of Chengxin Technology,” according to the company.
Without that inflow, its income would still have been negative, just as it was in 2018, 2019 and 2020.
AdvertisementCurrently, Didi does not operate in the US or in India, but does have a foothold in 15 countries other than China. It also offers bike sharing services, freight services, food delivery and other operations aside from ridesharing.
In its filing with the SEC, Didi boasts of having the world's largest network of electric vehicles, as of December 2020. It claims to have over one million electric vehicles, including new energy vehicles and hybrid electric vehicles, registered on its platform.
In order to support the large fleet of electric vehicles, Didi also built the largest electric vehicle charging network in China, with over 30% market share of total public charging volume in the first quarter of 2021.
Source: SEC filing
|Didi Chuxing||In the twelve months ending on March 31, 2021|
|Countries of operation||15|
|Annual active users||493 million|
|Annual active drivers||15 million|
|Average daily transactions||41 million|
The IPO will be led by underwriters Goldman Sachs, Morgan Stanley and JP Morgan. Didi did not state a targeted amount to raise, nor name which exchange it intends to trade on. It only disclosed that it expects to list under the ticker symbol DIDI.
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