China’s largest ride-sharing company Didi Chuxing has filed for a highly anticipated listing in the US, offering the first comprehensive glimpse of the firm’s financial performance.
Didi could aim to raise between 8% to 10% of an around $70 billion valuation, according to the Wall Street Journal. That could make Didi’s flotation one of the largest tech IPOs this year, which include a $5.4 billion debut in Hong Kong by Chinese short video app Kuaishou, a $2.2 billion US listing by dating app Bumble, and trading app Robinhood’s upcoming listing.
Founded in 2012 by Chinese entrepreneur Cheng Wei, an Alibaba alumni, Didi has a similar business model to Uber and Lyft, allowing users to order ride-hailing services through a smartphone app. The company also provides car-pooling, taxi booking, bike-sharing, and financial services for drivers, among other services, helping it to march towards the direction of becoming the next ubiquitous “super app” in China. In 2020, it generated nearly 95% of revenues from its mobility services in China, while the rest came from its international markets and other services.
Didi’s journey in China hasn’t always been smooth. The company faced national outcries after two incidents in which drivers who used the firm’s car-pooling service murdered female passengers in 2018, leading the company to temporarily suspend its hitchhiking function that once allowed drivers to comment on passengers’ appearance. It also had to fend off competition from a local rival Kuaidi Dache and Uber’s China operation by merging with the former in 2015 while acquiring the latter a year later.
Today, the company is almost the only word in ride-hailing in China, where competitors like Dida have yet to reach anywhere near its scale.
Here are five key numbers from the IPO filing, registered under Xiaoju Kuaizhi, that offer clues to the company’s future.
Didi Chuxing’s profits
The ride-hailing business is famously unprofitable, but the company managed to generate 5.5 billion yuan ($837 million) in net income in the three months ended in March—after being in the red between 2018 to 2020. However, part of the profit was thanks to Didi’s investment gains, including from its “deconsolidation of Chengxin Technology,” a grocery-buying business, according to its prospectus. Meanwhile, the firm’s losses from operations widened from 3.3 billion yuan ($516 million) in the first quarter last year to 6.7 billion yuan during the same period this year due to its rising cost of revenues and sales and marketing expenses, indicating delivering profitability will remain tough. The company, which is recovering from the Covid-19 hit to mobility, reported over 42 billion yuan in revenue for the March quarter and 141.7 billion ($22 billion) for the whole of 2020, compared to $11 billion reported by Uber last year.
Didi Chuxing’s annual active users
The company had 493 million annual active users for the 12 months ended in March, around 377 million of them in China. The company also recorded 41 million transactions on a daily basis during the period. In the first quarter, Didi had 156 million average monthly active users, compared with around 93 million for Uber during the fourth quarter last year.
Uber’s stake in Didi Chuxing
San Francisco-based Uber has a 12.8% stake in Didi. Yup, that’s right. Remember the 2016 deal that saw Didi take over Uber’s operations in China? It also gave the US ride-hailing firm a sizable stake in its Chinese rival. For comparison, founder and CEO Cheng has a 7% stake in the firm, while Jean Liu Qing, the company’s co-founder and its current president, owns 1.7%. Meanwhile, SoftBank’s Vision Fund owns 21.5% of the company, while social media giant Tencent holds a 6.8% stake. If things go smoothly, those investors could reap handsome returns from Didi’s flotation. The listing will also make 38-year-old Cheng, who is already estimated to have a net worth of $1.2 billion according to Forbes, an even richer billionaire.
Didi Chuxing’s R&D spending
The company spent 1.9 billion yuan ($297 million) on research and development in the first quarter, up from 1.5 billion yuan during the same period last year. The increased spending was mainly due to the firm’s hiring of more research talent, it said. Like other Chinese tech giants, Didi has been exploring opportunities in various areas beyond its main business by spending big on technology. The company has rolled out an electric sedan customized for ride-hailing in partnership with Chinese carmaker BYD, aiming to use the vehicle across China. It has set up an autonomous driving subsidiary, and operates over 100 autonomous vehicles, as well as has been testing its autonomous driving software and hardware with “leading global automakers,” according to its prospectus.
Didi Chuxing’s international growth plans
The company plans to use 30% of the proceeds from its IPO on “selected international markets.” Didi began expanding overseas in 2018, with a focus on Latin America, where it trails Uber but is nipping at its heels, particularly in Mexico. And one competitor in that market, Spain’s Cabify, is set to pull out of Brazil, which could leave more room for Didi to expand. This year it’s entering South Africa, where commuting is dominated by the country’s infamous mini-buses.
The firm plans to use another 30% of its IPO money on developing further technologies including autonomous driving and EVs, while around 20% will be spent on introducing new products and expanding current offerings. This probably means you should expect to see Didi coming more quickly, or expanding more aggressively, in the cities where you live.