China's ride-hailing giant Didi Chuxing gears up for IPO

Didi Chuxing has unveiled its U.S. IPO filing. Yahoo Finance’s Akiko Fujita and Jared Blikre discuss.

Video transcript

AKIKO FUJITA: Well, China's ride hailing giant is preparing for that blockbuster IPO in the US. Didi Chuxing making its filing public on Thursday. Some interesting numbers in here, Jared, because we're talking about a company that has dominated the landscape, the ride hailing landscape, over in China, a market that could potentially be worth $99.5 billion by 2023. But when you talk about Didi Chuxing alone, we're talking about potential $70 billion valuation. That is significantly higher than that $56 billion it was valued at in 2017.

A lot of our viewers may know this company as the one that bought out Uber's China business back in 2016 at a time when Uber was just pouring so much cash into that market to try and compete. The company posted a revenue of $21.6 billion last year. It was down about 8.4%. Not really surprising, given what we have seen from the likes of Uber and Lyft here in the US with the economic shutdown during the pandemic.

But it's going to be interesting to see what kind of appetite investors have number one, for a Chinese tech company at a time when the government has really been cracking down on some of these high growth companies. And also in the broader landscape, I mean, we're talking about a Chinese company, but this is one that is in 15 other countries. They have made significant inroads in places like Mexico and Brazil.

JARED BLIKRE: Yeah, and when you use the term dominating, that's exactly what they did. They beat Uber in China. That's a big deal. And it's a very competitive marketplace over there. And when you mention also the risk, the hurdles that they face with respect to government, yeah, China's been cracking down on them for two different reasons. One is because they're big. That's antitrust. And the other is because of the treatment of drivers. So the authorities there [INAUDIBLE] the leaders of Didi and a bunch of other ride hailing services in China and kind of castigated them. Said they have to treat their workers better. So there's that.

And then in the US, there is still concerns about cooking the books and trusting the Chinese auditors. They don't really, we don't really have the mechanisms in place to be able to trust financial statements. So we saw what happened with WeWork, and that was in this country. I don't think we're going to see the same thing with Didi. This is an operation that is vastly different in so many ways.

But it is going to be interesting to see what happens on day one. When we saw Uber and Lyft come to market in the US, and we can see the charts on the Wi-Fi Interactive here, get an Uber chart all the way from the max. You can see it wasn't very, it was a rocky start, because a lot of IPOs, and we've had, I've interviewed Kathy Donnelly on these shows many times. She wrote the book on IPOs. 92% undercut their day one low at some point. So if you're trying to get into these things and you like the company, just wait two or three months. It's not going to hurt you. So there's Uber.

We'll also take a look at Lyft. And we can do Dash afterwards, kind of in the same category as well. Here's Lyft. I remember that IPO. That was nasty. That day one, we got a spike up to 80. I was getting calls from family members, should I buy this? I said no, wait. And here's finally DoorDash. Very similar story. So no rush here.

AKIKO FUJITA: I'm like how you're handing out investment advice for your family, Jared.

JARED BLIKRE: That's what I do here.

AKIKO FUJITA: You pointed to Uber's chart there. There is a common thread in here, and that is, of course, SoftBank. SoftBank has about a 21 and 1/2% stake in Didi. Of course, they have a stake in Uber as well. So they stand to gain in a big way if this IPO is successful. And then Uber, of course, is part of that deal back in 2016. Gained about a 12% stake, roughly 13% stake in the company. So some big name backers. We're talking about SoftBank, Uber, Tencent as well, riding on this Didi IPO. And we're going to be watching that one really closely. Global race for ride hailing really heating up, Didi right at the center of that competition.