July 25, 2021

Didi, Chinese leader in mobility, prepares its IPO

The Chinese start-up Didi, which dominates the market for ordering taxis and cars with drivers in China, announced Thursday, June 10, to launch procedures to list on the New York Stock Exchange. The Chinese mobility giant could reach a value of 70 to 100 billion dollars, raising around ten billion, the largest IPO of the year and the largest for a Chinese company since Alibaba, in 2014. The company decided after making a first profit, at the beginning of 2021, of 196 million yuan (25 million euros). Didi wants to use the funds raised to accelerate its diversification into other activities, expand internationally and continue to invest in the mobility of the future.

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Founded in 2012, Didi has succeeded in a very competitive market. At the time, Didi Dache and Kuaidi Dache emerged among a dozen players, helped by powerful supporters: Tencent, the king of media and social networks, for Didi, and Alibaba, champion of e-commerce, for Kuaidi.

“The growth in their turnover is slowing down. They need a new story ”An analyst

Faced with competition from the American Uber, the two Chinese merged in 2015 to give birth to Didi Chuxing, the only major start-up in China to count the two rivals Alibaba and Tencent among its supporters. The new entity can engage in the battle with Uber more serenely: the trips at discounted prices and the subsidies for the drivers continue, until the American throws in the towel, in 2016, and cedes his activity to Didi. against a share of the capital. The following year, it is the Japanese SoftBank which is invited to the capital of the Chinese leader of the VTC, to become, over the rounds of table, its main shareholder. SoftBank’s Vision Fund now owns 21.5% of Didi, Uber 12.8%, while Cheng Wei, the founder of Didi, and Tencent hold around 7% of the stake.

A fragile balance sheet

Like its international competitors, Uber, Lyft or Grab, Didi is greedy for capital: in 2020, the company achieved 141.74 billion yuan (18.3 billion euros) in turnover (down 8 , 4%, due to Covid-19) and lost 10.7 billion yuan. A fragile balance sheet, because the market is very difficult. “The threshold is not very high to get into this industry and neither is the loyalty of users: it is easy to attract customers with low prices, so Didi will continue to be challenged”, believes an analyst in a Chinese investment fund who prefers not to be cited. “The growth in their turnover is slowing down. They need a new story: international development and new sectors. But getting into new businesses is expensive, so they should continue to burn cash for a while. “

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