Less than 6 months ago DiDi Global Inc. completed its IPO on NYSE. And a few days ago, under pressure from Chinese authorities, DiDi announced delisting from NYSE. After delisting from US stock exchange, DiDi will complete IPO on Hong Kong stock exchange.
DiDi Global Inc offered 316,800,000 of ADSs (American depository shares). DiDi stock was approved for listing on New York Stock Exchange under the symbol “DIDI”.
DiDi Global Inc. history and main milestones
DiDi corporation commenced operations in 2012 through Xiaoju Technology. DiDi Dache app was launched to provide taxi hailing services. In SEC filings written long and heart touching story about the company origin, but we will skip it. Xiaoju Technology established subsidiaries in China to engage in mobility services. In 2013 DiDi was established in Cayman Islands as a holding company. In 2015 company was renamed after aquisition of Kuaidi (Xiaoju Kuaizhi Inc.). In 2016 DiDi acquired Uber China. In 2018 expanded into Brazil, Mexico and in another 15 countries. In 2020 launched purpose built electric vehicle for shared mobility. In 2021 company was renamed as DiDi Global Inc.
DiDi Global inc. mission is to make life better by transforming mobility. In SEC filings DiDi claims that they are the largest mobility technology platform in the world. Key components: shared mobility, auto solutions, electric mobility and autonomous driving. DiDi operate in nearly 4000 cities with 493 million annual active users. On average 41 million daily transactions.
In 2020 mobility market worldwide accounted for $6.7 trillion, but shared mobility and electric vehicle penetration were respectively 2% and 1% globally. By 2040 the global mobility market is expected to reach $16.4 trillion, with shared mobility at 23.6% and electric vehicles at 29.3%.
Business components of DiDi
In 2018 DiDi launched auto solutions in China (partnered with leasing companies and financial institutions to help drivers to obtain vehicles). As of March 31, 2021 DiDi had the largest vehicle leasing network in China (approx 3000 vehicle leasing partners).
For drivers fuel cost is one of the biggest expense and DiDi provide fuel discount on refueling stations. Discounts also provided on maintenance and repair shops. On DiDi platform registered over 1 million electric vehicles (including hybrid vehicles) and accounted for 38% of total electric vehicle mileage in China. For electric vehicles built the largest electric vehicle charging network in China (over 30% market share of total public charging volume).
According to estimations provided by the company, the cost per kilometre for shared mobility (for driver) for fuel car is RMB 1.1, but for electric car it’s RMB 0.8.
The future of shared mobility will be presented by autonomous driving. Autonomous driving improve vehicle utilization and reduce the cost of transportation. Company claims that developing Level 4 autonomous driving technology (as of 2021 it’s unrealistic). Company currently operate over 100 autonomous vehicles and test the software. In China Company offer buke and e-bike sharing for short distance urban transport alternative.
By 2030 expected 70% urbanization rate in China. This is an opportunity because more than 200 million people will shift to urban areas and will require mobility services.
Risk factors for DiDi Global Inc.
- If company is unable to attact or retain customers (this exactly what happened when Chinese authorities prohibited DiDi from acquiring new customers).
- If drivers will choose company competitor for work.
- Legal and regulatory risks, availability of licences, permits, approvals, etc. PRC government may change rules without prior notification (exactly what happened).
- Safety issues.
- Brand reputation.
- Huge debt and company may not achieve or maintain profitability.
- Investments in new technologies may not provide expected outcome.
- Changes in China’s economic, political or social conditions could have a material adverse effect on business.
- Currency rate and exchange fluctuations.
- Delisting from NYSE.
DiDi Global Inc. is a loss making company that somehow managed to show Q1 2021 net income $846.5 million. The company has not previously declared or paid cash dividends and have no intention to declare or pay any dividends in the near future.
The COVID-19 impacted business of shared mobility but DiDi quickly adapted to new business reality.
DiDi Global Inc. delisting from NYSE
In less than 6 months after its initial public offering, DiDi would be delisted from NYSE (New York Stock Exchange). Chinese government’s crackdown on leading technology companies lead to delisting announcement but later company’s stock will be listed in Hong Kong stock exchange. The board of directors published next statement “while ensuring that ADSs [American depositary shares] will be convertible into freely tradable shares of the Company on another internationally recognised stock exchange.”
According to rumours, Chinese government officials contacted DiDi before the IPO and asked to list its stock on Hong Kong Stock Exchange instead of New York Stock Exchange. One week after the IPO, the Cyberspace Administration of China ordered the main DiDi app to be taken down because of cybersecurity issues. After a few days, another 25 app (own by DiDi) was taken down from the Chinese playstore.
Chinese authorities have more control and supervision over companies that are listed on foreign stock exchanges. In August 2021, passed first Personal Information Protection Law that drastically limited the amount of consumer data collected by DiDi. According to new law, companies require to disclose which data collected and include the customer right to have it deleted. Because of new registrations, authorities found serious violations on how DiDi collected and stored personal data. Because of this DiDi was barred from accepting new customers.
DiDi is not the first Chinese company that got delisted form US stock exchanges. On IPO DiDi Global stock was offered at $14/share (raised $4.4 billion). After the delisting announcement, DiDi stock price fell to $6/share. DiDi market cap was $68 billion making DiDi’s the biggest IPO of a Chinese company listed on an American exchange since Alibaba’s (BABA) in 2014.
Preparation for an IPO in Hong Kong will take a few months and expected listing on March/April. Chinese authorities take own citizens personal data seriously and will do anything to prevent the leakage of sensative data to its geopolitical rivals. According to rumours, there’s upcoming regulations to effectively ban companies from IPO on foreign stock exchanges.
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