Didi, China’s leading ride-hailing platform, launched Wall Street on Wednesday, a one-year limit that ride-hailing and travel companies have struggled to weather the pandemic lockdowns linked to customary.
Didi started trading at $16.82 a share on the New York Stock Exchange, up 20% from the $14 asking price a share. But investor interest cooled throughout the day and Didi closed at $14.20, keeping the value of the company at more than $69 billion.
The company made its debut, trading under the ticker DIDI, as Wall Street continues to embrace fast-growing tech companies regardless of their profitability. In particular, ride-hailing companies like Uber and Lyft have proven to be heavy losers, often burning through billions in cash each year.
Didi is no exception. It lost $1.6 billion last year, though it reported a profit of $30 million in the first quarter of this year. Revenue fell 8% to $21.63 billion last year because of the pandemic, the company said in a regulatory filing.
Despite its dominance in China and other countries, Didi could face unusual scrutiny from investors as tensions continue between the US and China. The US government has placed a number of Chinese technology companies on a list that restricts their ability to do business with the United States or its trading partners.
“Didi, for better and for worse, is at the heart of the cold tech war between the US and China,” said Daniel Ives, managing director of equities research at Wedbush Securities. “It’s a successful IPO coming up, but it still has a lot to prove for investors worried about tensions between countries,” he said.
Investors may also be wary of regulators in Didi’s home country. China’s antitrust authorities have begun to aggressively scrutinize the country’s major internet companies. Last year, Chinese regulators began tackling what they called unfair and anti-competitive business practices in the internet industry.
“Chinese regulators already have these regulations in place,” said David Trainer, managing director of New Constructs, an investment research firm.
A taxi industry group wrote to the country’s antitrust watchdog in December, calling for a second review of Didi’s 2016 acquisition of Uber’s business in China. They investigated this purchase for antitrust reasons without taking any action. The letter alleges Didi used unfair subsidies to retain passengers and issued ride orders to unlicensed drivers and vehicles.
In April, Didi was one of nearly three dozen Chinese internet companies that were sued before regulators and ordered to ensure compliance with antitrust rules and “put the nation’s interests at stake.” above all else”.
Didi was quick to issue a statement, which the antitrust regulator published on its website, pledging to “promote the development and prosperity of socialist culture and science.” and strictly follow the law. Regulatory pressure has raised questions about whether Didi will be allowed to grow large enough to be consistently profitable, Mr. Trainer said.
Both Didi and Uber have made Latin America the focus of their global expansion. However, the region continues to experience increased waves of coronavirus, potentially making growth plans difficult.
“How will they do in places like Africa, the Middle East or South America? Would you call Didi or Uber? ” said Drew Bernstein, co-chairman of Marcum BP, an Asia-focused auditing and consulting firm.
Didi Dache was founded in Beijing in 2012 and merged with Chinese rival, Kuaidi Dache, in 2015 to form Didi Chuxing. In China, Didi’s ascent has mirrored the rise of other tech powerhouses including ByteDance, TikTok’s parent company, and food delivery giant Meituan.
Although Uber tried to compete in the Chinese market, Uber eventually sold its China operations to Didi in exchange for a stake in the company. Now that Didi has gone public, Uber’s stake is worth about $8 billion.
Two separate incidents in 2018 in which a Didi driver raped and killed a female passenger prompted the company to change its service but failed to attract users. However, even as many companies large and small have entered the ride-hailing business in China, Didi is still the leader.
Although Didi is dominant in China and operates in 16 other countries, including Australia, Brazil, Mexico and Russia, its valuation is significantly smaller than Uber’s $94 billion. But unlike Uber in its trading debut two years ago, Didi was able to stay above the IPO price on the first day of trading. Didi dwarfs Lyft, the second-largest ride-hailing company in the United States, valued at nearly $20 billion.
Didi says it has room to grow further as it expands its business into new international markets. “We aspire to be a truly global technology company,” Didi’s founders, Cheng Wei and Jean Liu, wrote in a letter accompanying the regulatory filing.
Didi was valued at $56 billion in 2017, and its investors include Japan’s SoftBank; Mubadala, an Abu Dhabi state fund; Alibaba and Tencent, China’s two main internet Goliaths; and Apple, invested $1 billion in 2016 to show their support for the Chinese market.
A number of Chinese businesses have sold shares on US exchanges in recent months, including those in industries such as electric vehicles, which have been embroiled in trade tensions between the two countries. Washington and Beijing. Chinese electric car maker Nio raised $2.6 billion in a December offering on the New York Stock Exchange.
Before leaving office this year, President Donald J. Trump banned Americans from investing in companies identified as having ties to the Chinese military. But his administration has failed to move forward with efforts to limit access to US capital markets for a wide range of Chinese companies.