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How to trade on Didi’s IPO

Xiaoju Kuaizhi, the Chinese ride-hailing company, more commonly known as Didi Chuxing or simply Didi, is set to list publicly on an American stock exchange this year. Find out all the information you need about Didi’s initial public offering (IPO), the company, and how to trade on Didi stock when it goes public.

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Why has Didi chosen to list on a US exchange?

Didi has decided to list on either the New York Stock Exchange or the NASDAQ, despite tightening US regulations for Chinese companies. In March 2021, the US Securities and Exchange Commission (SEC) adopted the Holding Foreign Companies Accountable Act, which could see Chinese companies that don’t adhere to strict new rules delisted from US exchanges.

Didi originally sought to list in Hong Kong, but changed its plans after fears that local scrutiny over issues like unlicensed vehicles and drivers could delay the IPO process there. Didi’s prospectus also warned that should China’s recovery slow, “our business… and financial condition could be materially and adversely affected.”

When is Didi’s IPO date?

Didi is expected to begin trading on 30 June 2021 under the ticker ‘DIDI’. You can keep track of upcoming IPOs that are due to debut on our platform.

What will Didi’s share price be?

Didi plans to sell 288m shares for $13 to $14 each in an IPO that is expected to raise up to $4bn in total. This figure could make Didi’s IPO the largest US listing of a Chinese company since Alibaba’s 2014 listing raised $25bn, and the sixth-largest in the US during the past decade.

What is Didi’s valuation?

The Financial Times estimates a “$65bn-plus” valuation for Didi, while The Wall Street Journal suggests the figure could be “upward of $70bn”. Reuters has suggested the figure could even reach $100bn.

The top end of this range would imply a similar market value to that of Uber, which has a market cap of around $90.7bn and owns a 12.8% stake in Didi, having sold its Chinese ride-hailing arm to the company in 2016. Other major shareholders include the SoftBank Vision Fund, which holds 21.5%.

Lyft, the other major listed player in the ride-hailing space, has a market capitalisation of around $18.9bn, while Singaporean competitor Grab is expected to list this year via a special purpose acquisition company (SPAC) deal with an expected $40bn valuation — although a fall in its SPAC partner Altimeter’s value is thought to have caused a delay.

It is likely that Didi’s IPO will make it one of the most highly valued companies in its industry. Investors should check the company’s valuation when its pricing is announced and compare with its competitors before buying.

How is Didi’s recent financial performance?

Didi reported $21.6bn revenue in 2020. In the most recent quarter of 2021, it posted revenues of $6.4bn, on which it made $837m net income before shareholder payouts.

For comparison, Uber’s most recent quarterly report saw revenue (excluding an accrual for historical claims relating to UK drivers) of $3.5bn, with a net loss of $108m. Lyft meanwhile reported $609m in revenue and an adjusted net loss of $114.1m. Please remember that past performance isn’t indicative of future results.

How to trade on Didi’s IPO

  1. Register for an account. We offer over 9,000 shares and ETFs on our platform, which will include Didi’s listing once it has taken place.
  2. Choose whether to spread bet or trade CFDs. Spread betting is our most popular product and it is tax-free in the UK*, whereas share CFDs do not require you to pay stamp duty and are available globally.
  3. Decide whether you want to go long (buy) or go short (sell). Please note that some trading restrictions may apply on initial trading.
  4. Follow market news. Didi is a trending company and there are many aspects of the IPO to consider, including regulations, business stance and stakeholders.
  5. Consider risk-management tools. Share prices can rise and drop suddenly on their stock market debut, so it may be worth adding stop-loss or take-profit orders to any open positions in order to prevent capital loss.
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Why might traders be interested in Didi’s upcoming IPO?

  • Didi is the dominant Chinese ride-hailing app at the moment, and is also a major player in autonomous driving, having recently been given permission to test autonomous vehicles in Beijing.
  • According to Didi’s prospectus, the company is the world’s largest mobility technology platform. The global mobility market is expected to grow from $6.7trn in 2020 to $16.4trn by 2040. In this period, global shared mobility and electric vehicle penetration are expected to increase from 2% and 1%, respectively, to 23.6% and 29.3%. China’s own mobility market is expected to reach $3.9trn by 2040.
  • Didi currently operates in 4,000 cities, counties and towns across 15 countries.
  • The company boasts 493m annual active users and 15m annual active drivers. Between them, they carry out an average of 41m transactions daily across the platform.
  • Platform revenues grew from RMB ¥18.7bn in 2018 to RMB ¥34.7bn in 2020, at a CAGR of 36%.
  • Didi is well-positioned to lead development of autonomous driving, given its massive repository of real-world traffic data.
  • The IPO could be the largest in the US throughout 2021.

What are the potential risks for Didi?

Potential headwinds exist, especially in the form of slower-than-expected pandemic recovery and regulatory challenges, both in China and the US. Potential investors should refer to Didi’s prospectus for the full list of risk factors, but some key ones to take note of include:

  • Ongoing impact of the coronavirus pandemic on business and operations. Didi’s prospectus says its Core Platform gross transaction value (GTV) fell 32.8% year-on-year in the first quarter of 2020, and that a slowdown in the recovery from the pandemic could materially and adversely affect its business and financials.
  • Litigation. The phrase “legal proceedings” appears 21 times in Didi’s prospectus. A week after Didi’s F-1 was filed with the SEC, China’s regulator instigated an antitrust probe into the firm. Additionally, Didi could be sanctioned in the US if it doesn’t follow strict new rules aimed at Chinese companies.
  • Didi already operates in many varied jurisdictions, and as it expands into more it will need to ensure full compliance with these. For example, drivers will require particular licenses or permits to operate in different locations.
  • Didi’s business is based on a double flywheel model, meaning failure to attract either customers or drivers could decrease the platform’s attractiveness for the other group, and therefore stifle its growth.

Who is Didi’s competition?

Globally, the largest listed companies in Didi’s space are Uber (UBER) and Lyft (LYFT). The former company owns a 12.8% stake in Didi, so it may prefer to look for synergies rather than competition. Lyft, however, will be a significant barrier to growth in the US. Between September 2017 and April 2021, Uber’s US market share fell from 74% to 68%, mostly to the benefit of Lyft whose share stood at 33% in 2021, according to data from Bloomberg.

Additionally, Singapore-based Grab is set to IPO through a SPAC in 2021, with a rumored $40bn valuation. Grab is Southeast Asia’s largest technology platform and it expects its addressable market to reach $180bn by 2025. If Didi hopes to expand in Asia, it will likely come into close competition with Grab. Didi’s Asian operations are so far restricted to Mainland China, Hong Kong, Taiwan and Japan.

Keep an eye out for future SPACs and SPAC mergers >

FAQ

Where can I trade on Didi’s IPO?

You can spread bet or trade CFDs on Didi’s shares once they are listed on our Next Generation trading platform. These will be in our product library under Products > Shares > US. Alternatively, you can search for the term “Didi” in the search box.

What is the lock-up period on Didi’s IPO?

Didi’s IPO is likely to have a lockup period of 180 days. During this period, Didi insiders won’t be able to sell shares. This can lead to share price volatility: for example, if insiders know something about the business that makes it a bad prospect, they may sell shares immediately after the lock-up period ends, reducing the share price. Learn more about short selling stocks.

Who is underwriting the Didi IPO?

Didi’s IPO will be underwritten by US investment banks Goldman Sachs, Morgan Stanley and JPMorgan. Goldman Sachs and JPMorgan were also involved in Coupang’s IPO, which is 2021’s largest to date. Keep track of other upcoming IPOs.

What risks does Didi’s IPO face from China’s antitrust probe into the company?

Reuters reported on 17th June that China’s market regulator, the State Administration for Market Regulation (SAMR), had opened an antitrust probe into Didi, similar to those launched against Alibaba Group and Tencent Holdings. The probe is examining whether Didi unfairly squeezed out smaller competitors, and the transparency of its pricing system. Didi believes that, should the regulator find breaches, pricing and unfair competition offences would be viewed as minor and would be mitigated by the number of jobs the company has created, so the company isn’t expecting a strong punishment.

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