China Scrutiny Casts Pall Over DiDi IPO

Earlier this week, we reported that DiDi, the ride-hailing giant from China, is hoping to hit a target of more than $60 billion — even up to $67 billion — for its initial public offering.

It would likely be the biggest American IPO of 2021, as well as the largest public offering from a Chinese company in the U.S. since Alibaba went public.

But will the company pull it off?

As Bloomberg reported Friday, the company faces the threat of an antitrust probe by the Chinese government into the country’s tech firms, which were “ordered by regulators in April to correct excesses, had warned in an earlier filing that it couldn’t assure investors that government officials would be satisfied with its efforts or that it would escape penalties.”

The news outlet notes that DiDi has settled for going public with a much lower number than the “most bullish expectations for “$100 billion.”

According to Bloomberg, DiDi responded to regulatory scrutiny with efforts to improve its network security. It also explored new businesses, such as car repairs and grocery delivery. This decision proved wise when the COVID pandemic shut down entire cities, and DiDi was able to deliver an $837 million profit in the March quarter.

“The company actually delivered positive Q1 earnings as profitability has been in short supply for many recent China IPOs,” Brock Silvers, chief investment officer at Hong Kong-based private equity firm Kaiyuan Capital, told Bloomberg. However: “Given the potential severity of China’s closed-door and unappealable regulatory process, investors may have been reluctant to assume such significant yet unquantifiable risks.”

DiDi had considered going public on the Hong Kong markets before going with New York. As PYMNTS reported this week, the company has set a price range of $13 to $14 per American Depositary Share, offering 288 million shares in the IPO.

The company operates in 15 countries other than China and boasts close to half a billion annual users worldwide. DiDi’s core business is a mobile app that can hail taxis, privately-owned cars and carpool services. It bought out Uber’s China unit in exchange for its American rival getting a 17.5 percent stake in DiDi.