On Thursday, Chinese ride-hailing giant Didi Chuxing published its IPO filing documents to go public in the United States. Reports of Didi's valuation range from $70 billion to $100 billion, and the company is expected to raise billions in its offering.
It’s not uncommon for Chinese companies to go public in the States, since it gives companies access to a deep well of capital and potential investors.. Didi’s IPO is expected to be one of the largest of the year and the largest one for a Chinese firm since Alibaba’s $25 billion IPO in 2014. Notably, Didi is partly owned by another ride-hail giant: Uber, which enjoys a 12.8 percent stake in Didi and stands to be among the biggest winners of the public offering.
Founded in 2012 by former Alipay manager Cheng Wei, Didi started as a taxi-hailing service that grew into a behemoth offering additional ride-hailing, delivery, and transportation services. After a vicious price war with Kuaidi Dache, then its largest rival in China, the two merged in 2015 at a private valuation of $6 billion. Famously, the company leveraged the dominance of its market position and its investors' deep pockets to thwart Uber’s attempt to enter China in 2016, with Uber’s S-1 revealing it had spent over $1.5 billion in China that year but only received $1 million in revenue.
In Super Pumped, author and reporter Mike Isaac detailed some of the tactics responsible for Didi’s success, which included sabotage such as paying local taxi operators to protest Uber and sending fake texts to Uber’s drivers claiming the company had shut down. Ultimately, Didiabsorbed Uber’s Chinese operations in a deal that made both companies shareholders in the other’s operations. While Didi cashed out of Uber in November and December 2020, Uber still holds millions of Didi shares.
Now that Didi is going public in the US, the company’s largest shareholders stand to catch a win. Uber’s 12.8 percent stake is larger than Wei's 7 percent share or Tencent's 6.8 percent, but is dwarfed by Softbank's Vision Fund (also invested in Uber), which owns 21.5 percent of the company.
Didi's filing shows that it earned about $21.6 billion in 2020, down 8 percent from the previous year thanks in part to COVID-19 restrictions. Like every other major ride-hailing firm, it recorded a loss of about $1.6 billion in 2020, as well as in 2019 and 2018. However, in the first quarter of 2021, it posted a profit of $30 million. That might not seem like much when compared to previous losses, but it sets Didi apart from every other gig company, including Uber, which have never turned a profit.