Chinese ride-hailing company Didi Chuxing has filed for an initial public offering (IPO) in the US, says Bloomberg. It was always expected to list at some stage, but the end of Covid-19 has prompted the company to accelerate its plans. It wants to raise some cash to help pay for its continued expansion and hopes to achieve a valuation of $70bn-$100bn.
At first glance, Didi’s hope of a $100bn valuation “does not seem too far-fetched”, says Lex in the Financial Times. It would value the company at around five times 2020 revenues, lower than the eight times Uber and Lyft command.
However, this is “misleading”, since Didi uses gross revenue figures, without deducting drivers’ salaries, which is how Uber and Lyft calculate their revenue. Adjusting Didi’s figures to take this into account means that the stock trades at 19 times sales. With ride-hailing still a “cut-throat” business in China, and “regulatory risks at home and abroad”, investors face having to “endure a steeper fare if they want to go along for the ride”. Still, Didi’s goal of at least a $70bn valuation is not unrealistic given that its IPO is “highly anticipated” and the IPO market is set to be “scorching hot” this summer, says Corrie Driebusch in the Wall Street Journal.
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Fund managers, venture capitalists and bankers have said that sentiment around tech companies is “even crazier than during the dotcom boom of the late 1990s”. Indeed, with other companies, including investment platform Robinhood, also set to hit the markets next month, things are “busier than they have been in decades at this time of year”.
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