Chinese ride-hailing giant Didi reveals $2 billion loss in US IPO filing

Didi accelerated its listing plans after its business rebounded as the coronavirus pandemic ebbed in China. PHOTO: REUTERS

NEW YORK (BLOOMBERG) - Chinese ride-hailing company Didi revealed a US$1.6 billion (S$2 billion) net loss for last year as it moves ahead with plans for a United States initial public offering (IPO).

The company, in its first public filing for the IPO, listed the offering as US$100 million, a placeholder that will change when it discloses terms for the share sale.

Didi filed on Thursday (June 10) under the business name Xiaoju Kuaizhi, with Goldman Sachs Group, Morgan Stanley and JPMorgan Chase & Co leading the offering.

Didi, one of the largest investments in SoftBank Group's portfolio, accelerated its listing plans after its business rebounded as the coronavirus pandemic ebbed in China. The company has been considering seeking a valuation of as much as US$70 billion to US$100 billion in the IPO, Bloomberg News reported in April.

In recent months, Didi has been trading at a valuation of about US$95 billion on the secondary market, said sources familiar with the matter who asked not to be identified because the information was private. The company last raised funding at a US$62 billion value last year, according to PitchBook. A representative for Didi declined to comment on the company's valuation.

SoftBank's Vision Fund, Uber Technologies and Tencent Holdings are currently among Didi's biggest shareholders, with a combined stake of about 41 per cent, its filing shows. Didi co-founder Will Wei Cheng holds 7 per cent of the shares.

SoftBank's 21.5 per cent stake could be worth US$15 billion or more at the targeted valuation range, although that stake could be diluted in the offering. The Japanese company invested more than US$10 billion in Didi, Bloomberg News has reported.

While Didi has expanded into 15 countries, most of its revenue still comes from its China mobility business.

Didi reported revenue of US$21.6 billion last year. In the first quarter of this year, as China recovered from the pandemic, revenue more than doubled from the year before to hit US$6.4 billion. The company also turned a profit for the quarter, reporting net income of US$837 million.

Safety Record

The alleged murder of two passengers by Didi drivers in the summer of 2018 sparked public outrage and the mass deleting of the company's app. Didi's founders Cheng and Jean Qing Liu called the deaths the company's darkest moment.

"In the summer of 2018, two tragic safety incidents occurred on our 'Hitch' platform," they wrote in a letter to investors included in the filing. "These shook us to our core. We felt an immense sense of sadness and responsibility and began a period of deep self-reflection."

The company cited safety concerns among the risks to its business, saying failure to ensure safety could cause it to lose customers.

In its filing, Didi said that, after the deaths, it suspended the Hitch Carpooling service for more than a year to develop procedures to protect riders and drivers.

Other potential risks for Didi line up with those of their ride-hailing competitors around the world. Rivals could undercut Didi's customer prices or poach drivers with better earning potential, the company said in the filing, and its business model would suffer if their army of drivers were reclassified as employees.

The company also cited the possibility of antitrust fines or regulations, as well as the chance its share price could drop because of negative sentiment in the US about Chinese companies.

Tech Enthusiasm

An IPO would cap a remarkable turnaround for a company that first ran afoul of regulators and then faced the effects of the pandemic. Didi seeks to tap the same investor enthusiasm that propelled this year's tech debuts by Chinese video service Kuaishou Technology and South Korean e-commerce pioneer Coupang.

Didi was founded in 2012 by former Alibaba Group Holding staffer Cheng Wei. It clashed with Uber in China for years until the US firm retreated in 2016, selling its operation in the country to Didi.

The company is looking for capital to invest in technology, grow its presence in some international markets and introduce new products. It is planning to expand into online commerce and bankroll a major foray into Europe.

Didi, which remains the dominant player in China, is also looking to leverage that lead to expand into adjacent arenas from autonomous driving to electric vehicles.

The company said in Thursday's filing that it plans to list its American depositary shares under the symbol DIDI, although it did not specify on which exchange.

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