Didi set for second quarter IPO valuing it at $62bn

Chinese ride-hailing giant Didi Chuxing Technology is accelerating plans for an initial public offering to as early as next quarter to capitalise on a post-pandemic turnaround, people familiar with its plans said.

Didi, the largest investment in SoftBank Group’s portfolio, is targeting a valuation above the $62 billion it secured during its last funding round, the people said, asking not to be identified discussing an internal matter. The company moved up plans from a previous target of late 2021 after its Uber-like car-hailing business bounced back with China’s success in bringing Covid-19 under control.

Based on a common 15 per cent float for mega-IPOs in Hong Kong, one potential venue, Didi could raise roughly $9bn in what would be one of the largest tech debuts globally in 2021. The company hasn’t made a final decision on the listing location, one person said. Didi’s plans remain preliminary and the timing could still slip till later in the year depending on negotiations.

An IPO would cap a remarkable turnaround for a company that ran foul of first regulators and then Covid-19. It hopes to tap the same investor enthusiasm that propelled tech debuts this year from China’s video service Kuaishou Technology to South Korean e-commerce pioneer Coupang.

“Didi wants to capitalise on the red-hot market for China IPOs,” said Brock Silvers, chief investment officer at Hong Kong-based private equity fund Kaiyuan Capital.

Didi president Jean Liu said last year the company’s core business had already begun making small profits. Daily rides and revenue have surpassed pre-pandemic levels and are now at a record high, sources said. “Didi doesn’t comment on market speculation and doesn’t have a definite IPO plan or timeline,” the company said in a statement.

Didi is looking for capital to expand into online commerce and bankroll a major foray into Europe, where it must compete with Uber Technologies. The company, which remains the dominant player in China despite competition from the likes of Dida, is also looking to leverage that lead to expand into adjacent arenas from autonomous driving to electric vehicles.

Dida filed for a Hong Kong listing last year.

“The barely profitable company thinks that a market sensing the end of Covid is supportive, but there may be red flags” in its costly overseas and business expansions, Silvers said.

Founded by former Alibaba Group Holding staffer Cheng Wei in 2012, Didi clashed with Uber in China for years until its American rival retreated in 2016, selling its operation in the country to its local rival. Didi secured a near monopoly, but then suffered a series of blows to its business and reputation.

In 2018, a pair of murders committed by contracted drivers spurred a regulatory investigation into its ability to police a vast network used by hundreds of millions. Its shares traded at a 40 per cent discount to its last valuation – even before the pandemic erupted and hobbled its business.

Didi’s stock is trading in the secondary market at about $43 to $49 per share currently, just below the $51 that SoftBank bought in at before the government probe, one source said.

Backed by Tencent Holdings, Didi now operates in 14 countries outside its home base, mostly in Latin America. In August, it began offering ride-hailing services in Russia, marking its first direct foray into Europe and it’s already an investor in Estonia-based Bolt Technology, the continent’s main rival to Uber. Didi would also be competing against apps like Gett, Ola and BlaBlaCar.

Its debut would hand another triumph to SoftBank and founder Masayoshi Son, who have profited from a number of high-profile debuts in recent months including Coupang and DoorDash. The Japanese billionaire made ride-hailing the cornerstone of his startup portfolio, investing more than $20bn in Uber, Didi, Southeast Asia’s Grab and India’s Ola.

Uber, where SoftBank remains the largest shareholder, is an example of how investor sentiment has changed over the past year. The US ride-hailing giant saw its shares plummet early last year, but they have since surged several fold on the prospects of an economic recovery.

Mr Son, who had drawn heavy criticism for investment bets like WeWork, has profited from the market’s recovery and is riding a wave of IPOs from his portfolio. Still to come may be Chinese social media giant ByteDance, valued at an estimated $180 billion, and Indonesia’s Tokopedia.

Mr Son invested more than $10bn in Didi, according to one source. The Chinese startup will not offer the kind of return that SoftBank saw from Coupang or DoorDash. But any return on the Didi investment will likely prove a relief after its long-standing struggles.