Chinese ride-hailing firm Didi Chuxing is fast-tracking its plans to go public, Bloomberg reports.
Why It Matters: The company, which is the largest investment in SoftBank Group’s portfolio, is shooting to capitalize on the post-pandemic turnaround as the car-hailing business surges back. Didi had previously targeted 2021 to IPO, but revised plans after China slowed the spread of Covid-19.
- Didi is targeting a valuation greater than the $62 billion number it reached during its last funding round.
- It could raise around $9 billion in a “common 15% float for mega IPOs in Hong Kong,” and be one of the biggest tech debuts in 2021 worldwide.
- Didi stock is selling between $43 and $49 per share on the secondary market, just below the $51 SoftBank got in on.
A Little Background: Didi was founded by former Alibaba staffer Cheng Wei in 2012. It battled Uber viciously until the American-based ride-sharing firm sold out its Chinese business to a local rival. For a moment, Didi had a monopoly-like operation but ran into its own issues.
- In addition to SoftBank, it’s also backed by Tencent.
Using The Money: With new capital, Didi aims to jump into online commerce and further expand into Europe (Didi is in 14 countries total) where it can compete directly with Uber. It’s also eyeing expansion into electric vehicles and autonomous driving.
Looking Ahead: It would be a notable turnaround for Didi, which ran into regulatory troubles and then Covid-19. But now, the company has the chance to lay out a pretty big reward for SoftBank, which put $10 billion into the company.
Didi, like Grab for Southeast Asia, is an interesting potential investment for tech and “reopening” exposure to China.
We will have to see what the company’s growth and financials look like and generally like to see a “China discount” to Western peers due to the government and transparency risks. We also don’t like to make Chinese stocks a huge part of our portfolio from a risk-management perspective.
But for a small portion of the portfolio, we don’t mind taking outsized bets in strong Chinese growth companies as long as it offers extremely compelling potential upside returns.