What to know about the 2021 Didi Chuxing IPO


In Chinese, Didi Chuxing can be translated as “honk honk, commute.” With such a name, it’s instantly recognizable as part of the mobile transportation industry. Run by business-savvy leaders, it is known in the industry as the “Uber-slayer” because it acquired Uber’s China-based operations and assisted South Asia-based Grab in it’s Uber battle.

Headquartered in Beijing, it has grown into one of the world’s largest mobile transportation companies with over 600 million users and drivers across Africa, Asia, Australia, Latin America and Russia. Starting as a ride-hailing app, now the company provides app-based transportation services, on-demand delivery services, freight and logistics, financial services; sales, leasing, financing, maintenance, and fleet operation of automobiles, electric vehicle charging and co-development of vehicles. One strategy they have used for increasing customers demonstrates their tech company roots: they have allowed any company to add Didi Chuxing’s ride-hailing button to their own app since 2016.

Xiaoju Technology Co. launched the DiDi Dache app in June 2012 in Beijing. Kuaizhi Technology Co. launched the Kauidi Dache app in May 2012 in Hangzhou. Both provided online taxi-hailing services. The two companies merged in 2015 to form one company and have continued to grow, now operating in 15 countries providing service in three areas: mobility services, financial services and cloud computing. They are planning a July 2021 IPO to raise $10 billion with a valuation of $100 billion. This is anticipated to be the biggest Chinese IPO in the US since Alibaba’s $25 billion IPO in 2014.

TL;DR

  • Cheng Wei founded Didi Dache in 2012. Kauidi Dache also started in 2012.
  • Both Didi Dache (“beep, beep!”) and Kauidi Dache (“fast taxi”) were ride hailing apps. The companies merged in 2015.
  • Didi Chuxing has had 24 rounds of funding and raised a total of $22.7B. Leading investors include Tencent and SoftBank.
  • Sales revenue has grown nearly every year. In 2016, sales revenue was $14.7 billion. In 2017, it was $25 billion. In 2018 it was $38.3 billion. In 2019, it was $48 billion. However, most of those years, they operated at a net loss.
  • In 2020, despite the pandemic, they had a net profit of $1 billion.
  • The company’s reputation was damaged after affiliated drivers harmed passengers. They updated and changed safety policies and app features in response.
  • They seek a $10 billion July 2021 IPO with a $100 billion valuation. Their most recent valuation was in April 2021 at $72 billion.

Related: What to know about the Grab IPO

Didi Chuxing at a Glance

Cheng Wei founded Beijing Orange Technology Co Ltd. in 2012, and soon launched Didi Dache, a taxi-hailing app. Prior to founding Beijing Orange, Cheng Wei worked for Alibaba for eight years. He has a BA from Beijing University of Chemical Technology. In 2015, after merging with their main competitor, Kuaidi Dache, the company became Didi Kuaidi. Later, the company rebranded to become Didi Chuxing. Wei is Chairman and CEO.

While the company initially started out as an app for ride-hailing in 2012 in one city, the vision was expanding to additional locations. The initial funding came from a September 2012 investment of $3million from GSR Ventures. From then until now, the company continues to work to improve the user experience, create social value and to build a sustainable ecosystem of transportation and services in all of the areas it serves. The company’s website indicates they provide tens of millions of flexible income-earning opportunities for people – including for veterans, women and laid-off workers.

The company received many early accolades as it achieved significant milestones. By December 2013, reports show they had achieved 55% of China’s smartphone-based ride-hailing market. In 2015, they were announced as a Davos Global Growth Company. In 2016, Didi Chuxing was included on two important lists: the Fortune “Change the World” list and MIT Technology Review “World’s 50 Smartest Companies” list. In 2017, they were nominated as one of the five best startups for TechCrunch’s 10th Annual Crunchies Awards. 2018 found the company topping: Fast Company’s “Top Most Innovative Companies in China” list, the Global CleanTech 100 list by Cleantech Group, Fortune’s “Change the World” list, and Best Hidden Gem for Mexico in Google Play’s Best of 2018 list.

Their four-part guiding vision makes their goals clear:

  • To become the world’s largest one-stop transportation platform.
  • To become the world’s largest operator of vehicle networks.
  • To become a global leader in smart transportation technologies.
  • To become a global leader in the revolution in transportation and automotive technology.

The company shares what it calls the “Didi Values”- six building blocks which are important to the company as they strive “to become a global leader in the revolution in transportation and automotive technology.” The top block is User Value Creation, which is lived out by choosing to innovate or be eliminated and putting safety first. Two blocks support User Value Creation: Data-Driven Thinking and Win-Win Collaboration. Data-Driven Thinking means they continually employ data to analyze and make rational decisions. Win-Win Collaboration requires company leaders to communicate well, thoroughly and with respect. Supporting those two are the final three blocks. First is Integrity, which at Didi Chuxing means that honesty and integrity are foundational bedrocks. Second is Growth which means they accept challenges, expand their vision, grow personally and grow professionally. The final block is Diversity because their company knows equity brings forth creativity and energy.

Their sales history shows steady growth in users and revenues; but this has not always translated into profits. In fact, at the time of the 2015 merger, Chinese news outlets reported the two companies were running at a combined loss in excess of $500 million. In 2018, they also experienced massive losses in excess of $1 billion. Like other service-providing companies, their business was affected by the pandemic – especially in 2019. However, 2020 saw increases in sales and $1 billion in net operating profit. Exact sales information is not available for this private company for every year; still their sales show no sign of stalling as they continue to expand into new markets.

Year Sales Revenue (in Billions) Users (in millions)
2016 $14.7 300
2017 $25.0 400
2018 $38.3 450
2019 $48.0 550
2020 *revenue undisclosed, net profit $1 billion 600

Didi Chuxing’s service offerings include: Didi Taxi, Didi Express (ride-sharing), Didi Premier (rides with special requests such as child car seats and adaptive vehicles for disabled riders), Designated Driving (having a driver drive the consumer’s car), Enterprise Solution (business travel services), Didi Bus (bus pooling and dispatching), Didi Luxe (professional chauffeurs in mid-to-high end luxury cars), Bike-Sharing, Xiaoju Automobile Solutions (leasing, trading, maintenance and repair), Didi Financial Services (insurance, loans, medical insurance), and Didi Food (food delivery).

It has grown through aggressive mergers and acquisitions; one of the most notable was the August 2016 acquisition of Uber China. The company continues to grow and currently operates in 15 countries: Argentina, Australia, Brazil, Chile, China, Colombia, Costa Rica, Dominican Republic, Japan, Mexico, New Zealand, Panama, Peru, Russia, and South Africa. They also have research and development centers in Canada and the US. The company has acquired five businesses: the February 2015 merger with Kuaidi Dache, the August 2016 acquisition of Uber China for $7 billion; the December 2017 acquisition of 19pay for $45 million, the January 2018 acquisition of 99 for $1 billion and the January 2018 acquisition of Bluegogo for an undisclosed amount after the start-up went bankrupt.

Cheng Wei, Founder, Chairman and CEO, is a well-known figure. Among his many accolades, in 2015, he, along with company President, Jean Liu, were at the top of Fortune’s China’s 40 under 40. The same year, he was also on Fortune’s global 40 under 40 list. In 2017, he was on Time’s 20 Most Influential People in Tech list and selected as a Global Game Changer by Fortune. In 2021, he was recognized as a role model in China for poverty alleviation.

Jean Liu, President, joined the company in 2014. Previously she was a managing director in Goldman Sachs, Asia for more than a decade. Liu has both a BA and an MS in Computer Science from Peking University and Harvard University, respectively. She received an honorary Doctor of Commercial Science from New York University. A recognized leader, in 2018 she was noted on many influential lists including: Vanity Fair’s New Establishment list, Fortune’s World’s Most Powerful Women list, Forbes’ World Most Powerful Women 2018 list, Forbes China’s Top 100 Businesswomen list and Nikkei’s 9 Most Influential Women in Asia Tech list. The accolades continued in 2019 with her inclusion in Fortune’s World’s Most Powerful Women list, FinanceAsia’s The Region’s Top Entrepreneurs list and Forbes China’s Women in Tech list. In 2020 she made Fortune’s list of the Most Powerful Women International in 2020. She is also a member of the board of directors of ONE Foundation.

The company’s mission is “to build a better journey” which they have done via growth and expansion. They also help their local communities. In March 2020, in response to the global COVID-19 pandemic, Didi Chuxing created a $10 million fund to support drivers and couriers who contracted the coronavirus. Additionally the company distributed more than 11 million sets of free masks and sanitizers and installed more than a million protective dividers in DiDi cars to slow the spread of the virus. All Didi driver partners (over 30 million) complete Didi Chuxing’s Health Guard routine including masks, temperature scanning and disinfection checks in order to log onto the platform to provide daily service. Additionally, more than 6 million free or price-reduced rides and meals were provided to frontline health workers and vulnerable people. Didi engineers open-sourced technological tools for mask verification and contact tracking to be used worldwide.

Didi Chuxing fundraising to know about

Didi Chuxing has raised $22.7 billion in 24 rounds of fundraising. They have kept some information under close wraps. Here’s a breakdown of key Didi fundraising over the years:

  • Series A: September 2012; $3million; GSR Ventures
  • Series B: July 2013; $15 million; Tencent
  • Series C: January 2014; $100 million; Tencent and others; valuation: $3.2 billion
  • Merger: February 2015; $1.3 combined; valuation: $6 billion
  • Series D: June 2015; $150 million; Weibo; valuation: $8.8 billion
  • Series E: July 2015; $2 billion
  • Series F: September 2015; $7 billion
  • Series G: June 2016; $4.5 billion; Apple, China Life Insurance & Alibaba; valuation: $28 billion
  • Series H: June 2016; $300 million
  • Series I: September 2016; $120 million; valuation: $33.7 billion
  • Series J: March 2017; $6 billion; SoftBank
  • Series K: April 2017; $5.5 billion; valuation: $50 billion.
  • Series L: December 2017; $4 billion; valuation: $56 billion
  • Private Equity: March 2018; $2 million; valuation: $60 billion
  • Private Equity: April 2018; $264.8 million; valuation: $60 billion
  • Series M: July 2018; $500 million; valuation: $60 billion
  • Series N: July 2019; $600 million; valuation: $62 billion
  • Series O: May 2020; $500 million, valuation: $62 billion
  • Series P: April 2021; $1.5 billion; valuation: $72 billion

In July 2015 when the company raised $2 billion it was the world’s largest single fundraising round by any private company and the largest fundraising round for a Chinese mobile internet company at the time. In June 2016, it surpassed those records when it raised $4.5 billion.

Path to the Didi Chuxing IPO

In less than two years of operation, Didi Chuxing surpassed unicorn status with its January 2014 valuation of $3.2 billion. They weren’t always exploring a New York IPO. In fact, in May 2016, a company spokesperson said they had no plan to undergo an IPO and in 2018 they began exploring their IPO options in China. In May 2020, Didi Chuxing President Jean Liu shared with CNBC that the company had strong balance sheets, without indicating exactly what the balance sheets showed, with no plans to raise capital in 2020. At the same time, Liu said Didi Chuxing’s ride-hailing service was already profitable and the company’s ride volume had recovered to 60%+ of the pre-pandemic levels. As of October 2020, global daily ride volume has exceeded 60 million.

When is the Didi Chuxing IPO?

Didi Chuxing filed their IPO confidentially in April 2021 and anticipates July 2021 execution. The SEC paperwork has not been released to the public. It is being underwritten by Goldman Sachs and Morgan Stanley. All three companies declined to comment on the deal

What investors should know about the Didi Chuxing IPO?

It is important to consider risks that might be specific to a particular company or industry. Let’s explore some of the potential risks investors might need to consider with a Didi Chuxing IPO.

The first risk to consider is the IPO is confidential. One benefit of confidential IPOs for companies is it shields vital operational and financial information from competitors’ for a few extra months. This confidentiality helps the company maintain a competitive edge a little longer; but for an investor, it means you don’t have the filing information up front.

Didi Chuxing could also be affected if tensions over trade between the U.S. and China re-surface. The company is exposed to political and regulatory considerations as they expand. Different countries regulate taxi companies in a variety of ways and at the same time consumers’ perceptions of traditional and app-based tax companies are influenced culturally. In the past, the company’s strategy has been to utilize significant subsidies to attract qualified drivers to partner with the company. In each market as they gain traction, the company has reduced subsidies and has to balance profitability with keeping enough drivers on the app to maintain public interest and brand loyalty.

A new obstacle for the company is that on April 29, 2021, China’s central bank and four other regulatory agencies declared their opposition to some of China’s biggest financial technology firms’ apps providing financial services beyond payments. Didi Chuxing has overcome controversy in the past. In December 2015, traditional taxi drivers protested so stridently that the company was forced to close their offices in the city of Luoyang and personnel had to be escorted to safety. In May and August of 2018, there was a wave of negative media coverage after two female passengers were murdered by drivers. Beginning in August 2018, Didi Chuxing invested $20 million to reform its platform including an evolving set of safety precautions, such as an in-app safety center, en-route audio recording, police assistance button and blocking function to restrict service from certain drivers and passengers and increased in-house customer service.

Since then, major safety incidents, in-trip conflicts, and sexual-related complaints dropped significantly. In addition to their strategy of geographic expansion, they are trying to grow the company’s presence in sectors such as autonomous driving. While consumer focus groups indicate a growing trend of consumers believing autonomous cars are safe – eight years ago, nearly 75% of consumers in all major automobile markets globally saw them as unsafe; versus 45% of consumers believing them unsafe two years ago – virtually none of the consumers surveyed were willing to pay more for this feature on cars purchased.

Didi Chuxing’s main competitors globally are publicly-traded Grab and Uber. Other competitors include private companies Manbang Co. (truck-hailing logistics service), Ola (online transportation network) and Caocoa (ride-hailing). There’s no guarantee other companies won’t enter the market in the different segments where Didi Chuxing operates.

The mobile transportation industry is expected to grow and mature. The company is building a cloud platform to efficiently balance supply and demand and enable mitigation of traffic congestion. Didi Chuxing expects its financial services segment to continue growing as well.

Bottom line

Didi Chuxing started the process of their blockbuster IPO which is expected to occur in July 2021. The infusion of capital will fuel their aggressive growth strategies. While no investor is exempt from risk, if Didi Chuxing can continue to increase its service offerings, expand into new geographic markets and maintain profitability, there is a potential for gain.

Related: What to know about Oatly’s 2021 IPO

Julie Pierce Onos is a Massachusetts-based writer and Organization Development expert. She loves the stories that numbers tell us about business, relationships and health. You can connect with her on Twitter at @juliepierceonos.

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