Didi nets $4.4b from NY float, but faces challenges

American depositary shares of Chinese ride-hailing giant Didi Global Inc ended their first trading day on the New York Stock Exchange 1 percent higher at $14.14 on Wednesday (local time), giving the company a market value of about $68 billion, but also sparking talk of a tough business environment ahead.

The Beijing-based company raised $4.4 billion from its IPO of about 317 million ADS, or about 10 percent more than originally planned, according to an updated filing.

That made it the second-largest US listing by a Chinese company on record, after Alibaba Group Holding Ltd.

But experts said the listing size is lower than what some people had expected, suggesting the company may have faced some challenges, and might even encounter regulatory risks, going forward.

Shen Meng, director of boutique investment bank Chanson and Co, said Didi has a dominant presence in China's ride-hailing market.

But it faces risks such as stricter regulations, and the competition is also intensifying, given the rise of ride-hailing services offered by Chinese carmakers, Shen said.

Didi's IPO followed a strong revenue performance in the first quarter of this year, with ride-hailing services resuming their operations against a background of a receding COVID-19 pandemic.

Its revenue more than doubled to 42.2 billion yuan ($6.53 billion) in the first three months of this year from 20.5 billion yuan a year earlier. More importantly, it reported a profit of $95 million in the period, marking progress for Didi which had historically been unprofitable.

Didi, which was founded in 2012, said in its IPO prospectus that it has 493 million annual active riders, and 41 million average daily transactions. It began expanding internationally in 2018, and the company now operates in 14 countries outside of China, including Brazil and Mexico.

Didi said it will invest approximately 30 percent of the proceeds raised from the IPO to boost its technological capabilities, including shared mobility, electric vehicles and autonomous driving technologies.

About another 30 percent will be used to grow its presence in international markets, and 20 percent in introducing new products and expanding existing offerings for consumers, Didi's prospectus said.

Cheng Wei, founder and CEO of Didi, said in 2020 that in the next 10 years, Didi will optimize software and hardware simultaneously and rapidly iterate products and services, with the aim of achieving fully autonomous driving by 2030.

Gu Dasong, executive director of transportation and development research center at Southeast University, said it will still take time for Didi to further improve its profitability while maintaining steady growth; and in the international market, it has to compete with the likes of Uber.

Didi is the latest big-ticket Chinese corporate to have listed in the US stock market bucking the recent trend of some US-listed Chinese firms delisting to return home to list on domestic bourses instead.

This year, like Didi, 28 other Chinese firms have made US IPOs, and raised $7.6 billion in the first six months, according to Refinitiv data.