Didi, the leading Chinese ride-hailing platform, made its Wall Street debut on Wednesday, crowning a year in which ride-hailing and travel companies struggled to break temporary pandemic bans.
Didi began trading at $ 16.82 per share on the New York Stock Exchange, up 20 percent from an offering price of $ 14 per share. But investor interest cooled during the day, and Didi closed at $ 14.20, putting the company’s value at more than $ 69 billion.
The company debuted under the ticker DIDI as Wall Street continues to encompass fast-growing technology companies, regardless of their ability to generate profits. Ride-hailing companies like Uber and Lyft in particular have proven to be wasteful money losers, often burning billions in cash every year.
Didi is no exception. It lost $ 1.6 billion last year, despite posting a profit of $ 30 million in the first quarter of this year. Revenue fell 8 percent to $ 21.63 billion last year due to the pandemic, the company said in a regulatory filing.
Despite its dominance in China and other countries, Didi could face unusual scrutiny from investors due to the ongoing tension between the US and China. The American government has put some Chinese technology companies on lists that limit their business opportunities with the United States or its trading partners.
“For better or for worse, Didi is at the center of the cold tech war between the US and China,” said Daniel Ives, managing director of equity research at Wedbush Securities. “It’s a successful IPO just around the corner,” he said, but it has much to prove to investors worried about tensions between countries.
Investors could also be wary of regulators in Didi’s home country. China’s antitrust authorities have begun aggressively scrutinizing the country’s major internet companies. Last year, Chinese regulators began cracking down on unfair and anti-competitive business practices in the Internet industry.
“You already have China’s regulators in your crosshairs,” said David Trainer, executive director of New Constructs, an investment research firm.
A taxi industry group wrote to the country’s antitrust authorities in December, urging the agency to re-examine Didi’s purchase of Uber’s business in China in 2016. She had already investigated the sale for antitrust reasons without taking any action. In the letter, Didi was accused of using unfair subsidies to hold passengers and to provide driving orders to unlicensed drivers and vehicles.
In April, Didi was one of nearly three dozen Chinese internet companies dragged in front of regulators and ordered to ensure their compliance with antimonopoly rules and “put the nation’s interests first”.
Didi promptly published a statement that the antitrust authority published on its website, in which it promised to “promote the development and prosperity of socialist culture and science” and to strictly abide by the law. The regulatory pressure raises questions about whether Didi can grow big enough to be profitable in the long term, said Trainer.
Both Didi and Uber have made Latin America a focus of their global expansion. But the region continues to see rising coronavirus case numbers, which may thwart growth plans.
“How will they fare in places like Africa, the Middle East or South America? Are you going to call a Didi or an Uber? ”Said Drew Bernstein, co-chair of Marcum BP, an Asian-focused accounting and advisory firm.
Didi Dache was founded in Beijing in 2012 and merged with Chinese rival Kuaidi Dache to form Didi Chuxing in 2015. In China, Didi’s rise has mirrored that of other tech powerhouses like ByteDance, TikTok’s parent company, and food delivery giant Meituan.
Although Uber tried to compete in the Chinese market, it eventually sold its Chinese operations to Didi in exchange for an interest in the company. Now that Didi is on the stock exchange, Uber is worth about $ 8 billion.
Two separate incidents in 2018, in which Didi drivers raped and killed female passengers, spurred the company to change its service, but did not detract from user appeal. Although numerous large and small companies have entered the ride in China, Didi continues to lead the way.
Although Didi is dominant in China and operates in 16 other countries including Australia, Brazil, Mexico, and Russia, its valuation is significantly less than Uber’s $ 94 billion. But unlike Uber on its trading debut two years ago, Didi was able to stay above its IPO price on the first day of trading. Didi dwarfs Lyft, the second largest ride hailing company in the United States valued at nearly $ 20 billion.
Didi said the company is able to continue growing as it expands its business into new international markets. “We strive to become a truly global technology company,” wrote Didi’s founders, Cheng Wei and Jean Liu, in a letter that was attached to the regulatory filing.
Didi was valued at $ 56 billion in 2017, and its investors include SoftBank of Japan; Mubadala, an Abu Dhabi state fund; Alibaba and Tencent, China’s two main Internet Goliaths; and Apple, which invested $ 1 billion in 2016 to demonstrate its support for the Chinese market.
A number of Chinese companies have sold stocks on American stock exchanges in recent months, including those in industries such as electric vehicles that have been caught in trade tensions between Washington and Beijing. Chinese electric car maker Nio raised $ 2.6 billion in an offer on the New York Stock Exchange in December.
Before President Donald J. Trump stepped down this year, he banned Americans from investing in companies with ties to the Chinese military. But his administration made no headway in efforts to restrict access to American capital markets for a wider range of Chinese companies.