Published , by Captain Business
Published , by Captain Business
Didi Chuxing is a ride-hailing company based in China that has the eyes of Wall Street on it today. The company has been hailed as the Uber of China, and has even scored investments from megacap tech companies like Apple Inc. Shares went public this morning, and it doesn't seem like the market is going bananas over the stock. At the time this article was published, DIDI was only up 1,43% on the day after popping nearly 30% in the morning.
The company's valuation topped $80 billion this morning as shares hit an intraday high of $18.01/share after opening at $16.65/share. The stock closed the day at $14.20/share, only up 20 cents (1.43%) on its first trading day in the United States. The IPO was set at $14/share. Some analysts had predicted that Didi Chuxing would top $100 billion on its first day of trading, but that has not come to fruition yet.
Some companies benefitting from today's IPO include Uber, which owns 12.8% of Didi following the sale of Uber China to the company, Softbank's Vision Fund, which owns 21.5% of the company, and Apple. Apple had invested $1 billion in Didi back in 2016.
Didi isn't actually profitable, much like its American ride-hailing counterparts Lyft and Uber. Didi reported a loss of $2.54 billion on revenues of $21.63 billion in 2020, but many investors hope that 2021 will see brighter days for demand. Revenues at Didi fell 10% in 2020 from 2019, leaving many hopeful for a reopening tailwind.
Didi was founded in 2012, and stated in its IPO prospectus that the company has 493 million active annual riders and averages 41 million transactions per day. That kind of market share has lead to regulatory scrutiny in China, as the company faces an antitrust probe in its home country. Didi warned potential investors that they may be subject to penalties as a result of the ongoing antitrust investigation.
Today's price action in Didi Chuxing (DIDI) is not very encouraging for newly-minted shareholders, but only time will tell if this is another great Chinese company that is headed to the moon or if it is a well-timed offering to help fund a business that has never turned a meaningful profit.
This article is only meant for educational purposes, and should not be taken as investment advice. Please consider your own investment time horizon, risk tolerance, and consult with a financial advisor before acting on this information.