Didi Chuxing has applied to raise $4bn in its New York initial public offering (IPO), setting the ride-hailing powerhouse up for the largest debut of a Chinese company in the US since 2014. Its flotation on the New York Stock Exchange (NYSE) follows a wider trend of Chinese tech firms moving to the US amid Beijing’s crackdown on big tech firms.
The Beijing-based company, filing under the name Xiaoju Kuaizhi, plans to sell 288 million American depositary shares at between $13 and $14 each, according to a regulatory filing with the US Securities and Exchange Commission on Thursday. This figure could jump to 331.2 million shares if the underwriters exercise their option to purchase additional shares in full.
The prospectus values Didi at about $67bn at the top end of its price range, almost 8% higher than its $62bn valuation during the last fundraising round in 2019. However, this estimate is still lower than the $100bn predicted by Reuters earlier this month.
Didi’s IPO would be the biggest by a Chinese company since 2014 when ecommerce behemoth Alibaba raised $25bn in New York. The flotation would also be one of the largest in the US in the past decade.
Didi’s NYSE flotation is part of a larger trend of Chinese companies choosing to list in the US, where they get a better return from the IPO.
“The US offers a better technology investor ecosystem to these players,” explains GlobalData analyst Swati Verma. “Between 2018 and 2020, US exchanges have seen 97 cross-border listings. In 2020, there were 37 cross-border listings and Chinese companies accounted for 25 of these.”
China’s Securities Regulatory Commission gives the freedom to Chinese companies to list anywhere and floating in the US provides many benefits.
“US offers the flexibility of selecting special purpose acquisition company (SPAC) vehicles,” explains Verma. “Benefits of merging with these shell companies include a less intrusive IPO process with fewer disclosure requirements. Such reverse merger listings have gained popularity as cheaper and faster alternatives to traditional IPOs.”
Meanwhile, in China, Didi is facing a mountain of antitrust investigations. Earlier this month, China’s State Administration for Market Regulation (SAMR) started an investigation into whether Didi used any competitive practices that unfairly squeezed out smaller rivals, Reuters reported.
The probe into the ride-hailing platform is part of Beijing’s sweeping crackdown on big tech companies. Tencent, Baidu, ByteDance, Alibaba and Ant Group are some of the other tech titans caught in the fallout.
Didi accelerated its listing plans after its business rebounded as the coronavirus pandemic ebbed in China. In the first quarter, revenue more than doubled from the equivalent period a year earlier to reach $6.4bn. The company also turned a profit for the three months, reporting net income of $837m. It still posted a $1.6bn loss last year on sales of $21.6bn.
Uber currently owns 12.8% of the shares in the company after selling its Chinese ride-hailing business to Didi in 2016. SoftBank’s Vision Fund holds a 21.5% stake in the company. Cheng Wei, Didi’s 38-year-old founder, owns 7% of the company’s shares and controls 16.2% of its voting power before the IPO.
According to GlobalData’s company profile, Didi offers app-based transportation services such as taxi, bus, designated driving, enterprise solutions, bike-sharing, e-bike sharing and automobile solutions, and food delivery services.
Its DiDi platform provides 10 billion passenger trips a year. The company serves 550 million users in more than 4000 cities across China, Brazil, Chile, Mexico, Australia, Colombia and Japan.