Didi Chuxing’s $60 Billion IPO Expected in Hong Kong Next Year

By Luigi Wewege Wednesday, October 21, 2020

Didi Chuxing, the Beijing-based ride-hailing company, is looking to launch an initial public offering (IPO) in Hong Kong next year, according to Reuters. The insertion of Hong Kong represents a change in initial plans as the ride-hailing firm previously wanted to list in New York.

Reuters reports that Didi is in discussions with investment banks for launching its much-anticipated IPO. Funded by tech behemoths such as SoftBank, Alibaba, and Tencent, Didi is considering hiring major investment banks as it prepares for its market debut.

$60 Billion Valuation

Didi is reportedly seeking to snatch a valuation of over $60 billion through the IPO, which is supposed to launch in the first half of next year. Many investors are seeing this as a great opportunity to cash in as the transport company started making strong profits, particularly in Q2 2020.

Didi started considering an IPO after it abandoned discussions with the domestic competitor Meiutan over a potential merger. The two companies disagreed on the valuation of the merged business.

Furthermore, Didi is looking to launch a new fundraising round before the IPO in an effort to elevate its valuation, sources said. Shares of the ride-hailing company are trading south of a valuation of $56 billion in a private market.

When asked to give a comment on the matter, the company said it has no “definitive” plan or timeline regarding its IPO. Such plans might easily change with different market conditions. So far, there have been no new reports on the new timetable regarding Didi’s IPO and fundraising round.

In 2015, Didi merged with its main competitor at the time, Kuaidi, to create a ride-hailing giant that offers its services through a mobile app that clients use to hail taxis, private cars, or even buses.

Before it started considering launching an IPO in Hong Kong, the company had been preparing to list in New York for years because of a larger capital pool and presence of similar rivals such as Uber and Lyft.

Back in 2016, Uber sold a business to Didi in exchange for a 17.5% stake, which made a $1 billion investment in Uber in return. Last month, Bloomberg reported that Uber is exploring options to sell part of its $6.3 billion stake in Didi Chuxing to raise cash.

High China-US Tensions Impacted IPO Decision

Didi has now decided to list in Hong Kong, mainly due to rising tensions between the United States and China that negatively affected many China-based companies, including TikTok and ByteDance.

Furthermore, Chinese firms listed in the US also have to deal with increased scrutiny and more rigorous audit demands. According to Reuters, a weak stock market performance of Uber and Lyft have further discouraged the Chinese transport giant from listing in New York. For instance, shares of Lyft are over two-thirds lower since its IPO.

Apart from Didi, Alibaba’s affiliate company, Ant Group, is preparing for its dual IPO in Hong Kong and Shanghai. It is expected to secure around $35 billion in what many anticipate to be the largest initial public offering ever.

The Trump administration has been considering adding the Ant Group to the US “Entity List,” which is a blacklist that bans American companies from collaborating with firms or individuals on the list. However, blacklisting Ant Group may not significantly affect its business as most of its consumers are in China and its products target the domestic market.

According to data by Refinitiv, $28.8 billion worth of initial and secondary listings have been conducted in Hong Kong year-to-date, and Didi’s listing in the city would represent another major contribution.

Even after taking heavy blows from coronavirus and anti-government protests, Hong Kong managed to snatch second place among top global stock exchanges, behind Nasdaq.

Summary

Chinese ride-hailing company Didi Chuxing is considering launching its IPO in Hong Kong in the first half of 2021. The company has been considering a listing in New York for years but has now reconsidered mainly due to escalating US-China tensions. Didi is reportedly looking to reach a valuation of over $60 billion through the IPO.

About the Author


Headshot of author Luigi Wewege

Luigi Wewege is the Senior Vice President, and Head of Private Banking at Caye International Bank. Outside of the bank, he serves as an Instructor at the FinTech School which provides online training courses on the latest technological and innovation developments within the financial services industry. Luigi is also the published author of: The Digital Banking Revolution.

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