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Monday, January 17, 2022

What makes Didi choose New York rather than Hongkong for its IPO?


Jason Lin

Hong Kong got benefits after U.S. regulators last year enacted a law to boot Chinese companies off U.S. exchanges unless American regulators are permitted to review their financial audits. The city has been attracting growing volumes of IPOs or dual-listings from mainland Chinese companies over the past two years.

However, Chinese ride-sharing giant Didi did not choose Hongkong this time but sought its debut in New York. The company recently filed F-1 with SEC to go public in the U.S., possibly becoming one of the biggest tech IPOs in 2021.

Founded in 2012, Didi has become China’s top ride-hailing firm and the world’s largest mobility technology platform. The company operates in nearly 4,000 cities, counties, and towns across 15 countries. Except for the traditional ride-sharing business, Didi also invests in making self-driving robotaxis a reality, and recently got approval to test self-driving vehicles in Beijing.

According to its SEC filing, Didi reported $21.6 billion in revenue but net losses of $1.6 billion in 2020. It also reported a net income of $837 million on revenues of $6.4 billion for 2021’s first quarter. By comparison, Uber’s (NYSE: UBER) net losses amounted to $6.77 billion on $11.14 billion in revenue for the year 2020, and the company reported a net loss of $108 million on revenues of $2.9 billion in its first quarter.

PitchBook data shows that Didi’s most recent valuation was $62 billion following its fundraising in August 2020. Bloomberg reported that the company could have a $100 billion valuation at the time of its IPO. Since Uber’s market capitalization was around $95 billion by the week of June 11th, Didi is highly possible to be the most valuable ride-sharing firm after its debut.

With the IPOs of Uber and Lyft (NASDAQ: LYFT), U.S. investors have already cleared about the ride-hailing economy and then can well digest Didi’s business model and the industry’s prospect. On the contrary, Hongkong’s investors would not give the company a surprising estimated valuation. Didi’s highest estimated valuation in Hongkong was no more than $80 billion, so that the company had to lean toward picking New York over Hong Kong for its IPO.


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