Didi IPO: SoftBank, Uber, Tencent Set for Gains

Didi Chuxing's U.S. IPO Filing Revealed

Following extensive anticipation, Didi Chuxing, the dominant ridesharing company in China, has officially submitted its IPO documentation in the United States. This filing provides initial insights into the company’s historical financial performance, which has included periods of net loss.

IPO Details and Valuation

The specific amount of capital Didi intends to raise through the IPO was not disclosed in the filing. However, reports from Reuters suggest a potential fundraising target of approximately $10 billion, based on a valuation nearing $100 billion. Conversely, The Wall Street Journal indicates a valuation closer to $70 billion. Currently, Uber’s market capitalization surpasses $90 billion.

Shareholder Structure

According to the prospectus, Cheng Wei, Didi’s 38-year-old founder, holds a 7% stake in the company’s shares. He also commands 15.4% of the voting rights prior to the IPO. Significant financial gains from the IPO are anticipated for major shareholders including SoftBank Vision Fund (21.5% ownership), Uber (12.8%), and Tencent (6.8%).

Beyond Ride-Hailing: Diversified Business Lines

Established nine years ago, Didi initially gained prominence through the acquisition of Uber’s China operations in 2016. The company has since expanded considerably, evolving into more than just a ride-hailing service.

Didi now encompasses a diverse portfolio of businesses. These include bike-sharing programs, grocery delivery, intra-city freight services, financial solutions tailored for drivers, the development of electric vehicles, and Level 4 robotaxis. The latter are described as representing the future of mobility, offering potential benefits in terms of reduced costs and enhanced safety.

Investment in Autonomous Driving

An autonomous driving subsidiary was established by Didi and secured $500 million in funding from SoftBank’s second Vision Fund in May of the previous year. This unit currently employs a team exceeding 500 individuals and operates a fleet of over 100 autonomous vehicles.

Furthermore, Didi is actively involved in the design of electric vehicles specifically intended for ride-hailing applications. This initiative aligns with China’s broader efforts to transition taxis and ridesharing fleets away from vehicles powered by fossil fuels.

Dominant Market Position

Throughout the year concluding in March, Didi facilitated services for 493 million annual active users and processed 41 million daily transactions. In the first quarter, the platform boasted 156 million monthly active users, significantly exceeding Uber’s 98 million during the same timeframe.

Official figures from China indicate that the nation had 365 million ride-hailing users as of December. This data suggests that Didi maintains a considerable portion of the overall market.

Revenue Sources

Mobility services consistently contribute over 90% of Didi’s total revenue. The company has pursued expansion into over a dozen international markets, including Brazil, where it acquired the local ride-hailing service 99 Taxis. Between 2018 and 2020, over 97% of Didi’s mobility revenue within China – encompassing taxi hailing, chauffeur services, and carpooling – originated from ride-hailing alone.

This lucrative carpooling business underwent significant revisions following a pair of tragic incidents.

Third-party data further confirms Didi’s leading position. Aurora Mobile, a firm specializing in app tracking, reported 77.6 million active Didi users in March. Caocao, its nearest competitor backed by Geely, had less than one-tenth of that user base.

Financial Performance

Didi experienced net losses from 2018 to 2020, concluding 2020 with a $1.6 billion net loss. However, the company achieved profitability in the first quarter of 2021, reporting a net profit of $837 million. This improvement was largely attributed to investment gains from the deconsolidation of Chengxin, its grocery group buying venture, and the sale of an equity investment.

First quarter revenue more than doubled year-over-year, reaching $6.6 billion. For comparison, Uber generated $2.9 billion in revenue during the same period.

Future Investment

Didi intends to allocate 30% of the funds raised through its IPO to advancements in shared mobility, electric vehicles, autonomous driving technologies, and related areas. An additional 30% will be dedicated to international expansion efforts. The remaining 20% will be invested in the development of new products.