CFA Society Singapore
HONG KONG (May 16): Apple Inc may not need to wait that long before it reaps the benefits of investing US$1 billion in Chinese car-hailing service Didi Chuxing.
Didi is targeting an initial public offering in New York next year, according to people familiar with the matter. The timing will depend on how its battle with Uber Technologies Inc in China plays out, said the people, who requested not to be named because the matter is private. Such a move may put the Chinese app ahead of its US rival in going public, with Uber having said it wants to hold off as long as possible.
China’s biggest ride-hailing app is in the process of raising about US$3 billion of funding, including Apple’s US$1 billion contribution, which has swelled the company’s valuation to about US$26 billion, people familiar have said. Didi, already backed by Alibaba Group Holding Ltd and Tencent Holdings Ltd, has reached break even in about half of the 400 Chinese cities it operates in as Uber spends heavily to win both drivers and riders.
“It’s great timing because the company is on a tear in terms of winning market share and users, and that may not last forever,” said Li Yujie, an analyst with RHB Research Institute Sdn in Hong Kong. “Didi could be facing some pressure from investors who want to see their investment returns.”
Tencent rose the most in two months, jumping 3.1% to HK$159.90 in Hong Kong trading. The stock was the biggest contributor to gains in the benchmark Hang Seng Index on Monday.
Didi, formally known as Xiaoju Kuaizhi Inc, declined to comment on any potential IPO in an e-mailed statement.
Apple Chief Executive Officer Tim Cook posted a picture on his Twitter account, showing him using Didi’s taxi hailing service together with Didi President Jean Liu. The post drew hundreds of comments.
At Didi’s current valuation, a US IPO could be the biggest by a Chinese company since Alibaba’s record offering in 2014. The company is among a list of ride-sharing apps including Uber and Lyft Inc that could conduct a public offering.
Didi hasn’t decided on which exchange and which banks to hire yet, the people said.
Didi was created last year when separate apps backed by Tencent and Alibaba merged after brutal competition drove up losses. The company now has 14 million registered drivers in China, delivering more than 11 million rides a day, and last month said it’s on track to turn an operating profit “soon.”
While Uber has been valued at US$62.5 billion and is the biggest ride-sharing app globally, it’s dwarfed by Didi in China. The company has set a target of operating in 100 Chinese cities this year, a quarter of Didi’s reach, and is currently unprofitable in the country.
San Francisco-based Uber has pledged to spend US$1 billion in China and has said it’s able to support its push in the country because it makes US$1 billion annual profit from its 30 largest global markets. Uber didn’t respond to an e-mailed request for comment on Apple’s investment in Didi.
Apple is just the latest blue-chip company to back Didi, which also counts SoftBank Group Corp and Temasek Holdings as existing investors. China’s sovereign wealth fund China Investment Corp and Beijing Automotive, controlled by the State-owned Assets Supervision & Administration Commission of Beijing, have also invested, people familiar have said.
Didi has used China Renaissance as a financial adviser in its previous fundraising. The company’s board members includes Lucy Peng, CEO of Zhejiang Ant Small & Micro Financial Services Group Co, and Tencent President Martin Lau.