Didi launches blockbuster US IPO in quest to go ‘truly global’
By Michelle Toh, CNN Business
Didi went public Wednesday in the biggest US share offering by a Chinese company since Alibaba debuted in 2014.
Stock in China’s biggest ride-hailing service started trading in New York at about $16.65, a nearly 20% jump from its initial public offering price of $14 a share.
Didi raised $4.4 billion from the stock sale, making it the largest Chinese IPO in the United States since Alibaba’s $25 billion offering in 2014, according to Dealogic.
At its opening price, Didi is valued at more than $80 billion.
Political and regulatory headaches
Didi, which forced Uber out of mainland China five years ago, is listing on Wall Street at a delicate time. The company has attracted scrutiny from regulators in China, where the tech sector is undergoing a historic crackdown.
In April, the ride-hailer was one of 34 companies summoned for a meeting with the State Administration for Market Regulation (SAMR), where executives were told to put an end to any anti-competitive behavior and ordered to carry out internal inspections.
This month, Reuters reported that Didi was being investigated for antitrust concerns. According to the report, which cited anonymous sources, Didi was being probed by SAMR about whether it had “used any competitive practices that squeezed out smaller rivals unfairly.”
Didi said in a statement at the time that it would “not comment on unsubstantiated speculation from unnamed sources.” SAMR did not respond to a request for comment from CNN Business.
The company is also making a splash in New York amid significant US-China tensions.
While many major Chinese tech firms trade in the United States, including Alibaba and JD.com, the environment has gotten more volatile in recent years. Lately, a flurry of Chinese companies listed on Wall Street have held secondary offerings in Hong Kong so they can establish stronger roots closer to home, with some citing worsening regulatory hurdles in the United States. Some, like China Mobile and China Telecom, have been kicked off US exchanges altogether.
Despite the tensions, 2020 still saw some $12 billion raised by Chinese companies from US listings, according to data provider Refinitiv. Almost $8 billion has been raised by Chinese firms so far in 2021, more than triple the amount reached at the same point last year.
Didi is emblematic of both trends. Its upcoming debut will mark one of the top 10 US listings over the past decade, as well as the fourth-largest US IPO by a Chinese company on record, according to Dealogic.
But in recent months, the company has also considered a dual listing in Hong Kong, according to a person familiar with the matter.
A Chinese champion
Didi is ubiquitous in China, boasting 377 million annual active users in the country alone.
The company was founded in Beijing in 2012 by former Alibaba manager Cheng Wei, who created a cab service provider known as “Didi Dache,” which means taxi-hailing in Mandarin.
Didi rapidly won the backing of heavyweights including Apple, SoftBank and Alibaba, while also fending off rivals. In 2015, it acquired its top local competitor, Kuaidi Dache, effectively knocking an opposing horse out of the race. The new combined company rebranded its flagship app to Didi Chuxing shortly afterward.
In 2016, Didi also bought Uber’s China business, ending the US firm’s presence there. Former Uber CEO Travis Kalanick acknowledged Didi as “a fierce competitor,” and agreed to have the companies exchange stakes. (Didi exited its position in Uber late last year. Uber retains a stake of about 12% in Didi.)
Since then, Didi has ballooned to offer a whole suite of services, including ride-hailing, bike-sharing, taxi and carpooling services.
The firm now bills itself as the world’s largest mobility platform, with users in China and 15 other countries, including Brazil, Mexico and Russia.
But it remains extremely reliant on its home market: More than 93% of its sales come from China.
The company is looking to change that. In a Securities and Exchange Commission filing, Didi said it planned to use a third of the money it is raising to expand its footprint outside China.
“We aspire to become a truly global technology company,” Will Wei Cheng and Jean Qing Liu, who serve as CEO and president, respectively, wrote in a letter to investors.
Another third of the funding will be used to develop its technology in areas such as electric vehicles and autonomous driving. The rest will go toward coming up with new products or services, or other strategic investments. In their letter, Cheng and Liu said that the company was exploring new launches in areas such as “intra-city freight, community group buying and food delivery.”
Like many startups, Didi has struggled to turn a profit for years, despite pulling in billions of dollars in revenue.
It finally managed to turn that around this year, eking out roughly $800 million in net income for the quarter ended March.
“Didi is a terrific, founder-led, industry-leading innovator,” Jim Breyer, founder and CEO of Breyer Capital, an investor, told CNN Business in an email. “I have been privileged to observe their leadership since I first invested several years ago and look forward to their next chapter of growth.”
The company plans to list on the New York Stock Exchange under ticker symbol “DIDI.”
— CNN’s Beijing bureau, Julia Horowitz, Pamela Boykoff, Jill Disis, Diksha Madhok and Paul R. La Monica contributed to this report.
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