Didi in the Driving Seat: Didi Files for IPO​


By Robyn Ma​

The Story

Didi Chuxing, China’s largest ride-hailing company, filed for an initial public offering (IPO) in the United States. Although the company operates in 15 countries, 93% of its sales come from China (CNN). Didi “could raise around $10 billion and seek a valuation of close to $100 billion” (Reuters). Despite facing losses, Didi turned a profit in the first quarter of 2021, with net income at $5.49 billion RMB.

And who are Didi's major shareholders? Uber owns 12.8% of Didi as a result of the former “exiting China and selling its subsidiary there to Didi” (Market Watch). Softbank holds the largest stake, with 21.5% of Didi’s equity.

What it Means for Businesses and Law Firms

The pandemic has created financial difficulties for Didi. Data from Aurora Mobile points to a decline in daily active users on Didi’s ride-hailing app (Financial Times). Likewise, drivers feel “disinclined” to travel (Financial Times). Costly Covid-19 measures, such as distributing masks to drivers, have complicated things further.

Still, the company was plagued with problems before the pandemic. The rape and murder of two female passengers by Didi drivers in 2018, and accusations of unfair treatment of drivers had led to “ballooning losses” (Market Watch; Financial Times). Authorities have previously pushed the firm to enhance safety standards, and Didi was also charged by the Ministry of Transport for imposing “unreasonably high commissions and implementing regulator pricing rules” (Reuters). These warnings form part of a campaign launched by Chinese regulators to “reign in its internet giants [and] break up monopolies” (Financial Times).

There is also a tense China-US geopolitical environment. Biden’s administration recently banned American investors from investing in several Chinese companies. Described as an effort to bar Beijing from using American capital to compromise national security, US investors are prevented from directly investing in debt and equity securities (Financial Times). However, “US financial markets did not move much on the news”, perhaps because they had foreseen such developments following Trump’s approach to China (Financial Times). Chinese companies have nonetheless rushed to Hong Kong for secondary listings in anticipation of “worsening regulatory hurdles” (CNN). It is notable that Didi has chosen to list in New York.

Didi’s announcement comes as the IPO market may be cooling off. Previous investor enthusiasm and large price jumps are slowing down (Market Watch). However, it was still above historical levels. The “deluge of listings lifted IPO proceeds to $230 billion” this year, compared to “the previous peak of $80 billion in 2000” (Financial Times). A slowdown in SPACs (special-purpose acquisition companies) could be the cause, as regulators step in to check the SPAC boom. Skadden Arps Slate Meagher & Flom LLP is advising Didi on the IPO, whilst Goldman Sachs, JP Morgan, and Morgan Stanley are underwriting the IPO, and are being advised by Simpson Thacher & Bartlett LLP.

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