IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

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Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

<a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Chuxing (DIDI US)</a> is the world's largest mobility technology platform by annual active users and by average daily transactions for the twelve months ended 31 March 2021, according to CIC. The DiDi Chuxing app in China where consumers can access mobility and other essential services. Didi is backed by Softbank Vision Fund (21.5% stake), <a href="https://www.smartkarma.com/entities/uber-technologies-inc" target="_blank" data-smartkarma-citation="entities:430:1" rel="noopener">Uber (UBER US)</a> (12.8%), <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> (6.8%), <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a> and <a href="https://www.smartkarma.com/entities/toyota-motor-corp" target="_blank" data-smartkarma-citation="entities:73:1" rel="noopener">Toyota Motor (7203 JP)</a>. Didi has priced its IPO at $14.00 per ADS, which is at the top-end of the IPO price range of $13.00-14.00 per ADS, <a href="https://www.reuters.com/business/chinas-didi-raises-4-billion-us-ipo-source-2021-06-29/" target="_blank" rel="noopener">according to Reuters</a>. Reuters also noted that Didi sold a higher 317 million ADS versus the planned 288 million ADS (10% more), resulting in a fully-diluted market cap of $73 billion ($67.5 billion on a non-diluted basis).<div>In <a href="https://www.smartkarma.com/insights/didi-chuxing-xiaoju-kuaizhi-initiation-in-for-a-bumpy-ride" target="_blank" data-smartkarma-citation="insights:53014" rel="noopener">Didi Chuxing (Xiaoju Kuaizhi) Initiation: In for a Bumpy Ride?</a>, we opined that Didi’s core china mobility business is heading on the right trajectory with rising growth and improving margin. However, Didi is saddled with two other businesses (international and other initiatives) which are driven by its global ambitions and its desire to provide a broad array of service offerings to consumers and drivers. This ecosystem strategy is sensible for a company that possesses a highly profitable and cash generative core business. Unfortunately, Didi’s core china mobility business is not close to achieving this status and the international and other initiatives business look like unnecessary and costly distractions. </div><div>
In <a href="https://www.smartkarma.com/insights/xiaoju-kuaizhi-didi-chuxing-ipo-growth-vs-margin" target="_blank" data-smartkarma-citation="insights:53232" rel="noopener">Xiaoju Kuaizhi (Didi Chuxing) IPO: Growth Vs Margin</a>, we examined the key financial metrics of Didi china mobility and international business to the relevant business units of its peers - Uber, <a href="https://www.smartkarma.com/entities/lyft-inc" target="_blank" data-smartkarma-citation="entities:24423:1" rel="noopener">Lyft Inc (LYFT US)</a> and <a href="https://www.smartkarma.com/entities/grabtaxi-holdings-pte-ltd" target="_blank" data-smartkarma-citation="entities:26950:1" rel="noopener">Grab (0967655D SP)</a>. Our analysis showed that Didi offered a trade-off between growth and profitability in comparison to its peers. We concluded that in combination with the ongoing regulatory overhang, we are inclined to remain on the sidelines.
In <a href="https://www.smartkarma.com/insights/didi-global-ipo-valuation-insights" target="_blank" data-smartkarma-citation="insights:53626" rel="noopener">DiDi Global IPO: Valuation Insights</a>, we noted that the proposed IPO valuation is materially below the previously rumoured top-end valuation of $100 billion. In combination with our SoTP valuation, we opined that Didi is fairly valued at the IPO price range.   
<div class="content-highlight">Our relative valuation suggests that the IPO price is full. Updating for the final IPO raise and the latest peer multiples, our SoTP valuation is $13.54 per ADS, which is marginally below the IPO price of $14 per ADS. Consequently, we would take profits on any meaningful first day IPO pop.</div>
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DiDi Chuxing (DIDI US) is the world's largest mobility technology platform by annual active users and by average daily transactions for the twelve months ended 31 March 2021, according to CIC. The DiDi Chuxing app in China where consumers can access mobility and other essential services. Didi is backed by Softbank Vision Fund (21.5% stake), Uber (UBER US) (12.8%), Tencent (700 HK) (6.8%), Alibaba Group (BABA US) and Toyota Motor (7203 JP). Didi has priced its IPO at $14.00 per ADS, which is at the top-end of the IPO price range of $13.00-14.00 per ADS, according to Reuters. Reuters also noted that Didi sold a higher 317 million ADS versus the planned 288 million ADS (10% more), resulting in a fully-diluted market cap of $73 billion ($67.5 billion on a non-diluted basis).In Didi Chuxing (Xiaoju Kuaizhi) Initiation: In for a Bumpy Ride?, we opined that Didi’s core china mobility business is heading on the right trajectory with rising growth and improving margin. However, Didi is saddled with two other businesses (international and other initiatives) which are driven by its global ambitions and its desire to provide a broad array of service offerings to consumers and drivers. This ecosystem strategy is sensible for a company that possesses a highly profitable and cash generative core business. Unfortunately, Didi’s core china mobility business is not close to achieving this status and the international and other initiatives business look like unnecessary and costly distractions. 
In Xiaoju Kuaizhi (Didi Chuxing) IPO: Growth Vs Margin, we examined the key financial metrics of Didi china mobility and international business to the relevant business units of its peers - Uber, Lyft Inc (LYFT US) and Grab (0967655D SP). Our analysis showed that Didi offered a trade-off between growth and profitability in comparison to its peers. We concluded that in combination with the ongoing regulatory overhang, we are inclined to remain on the sidelines.
In DiDi Global IPO: Valuation Insights, we noted that the proposed IPO valuation is materially below the previously rumoured top-end valuation of $100 billion. In combination with our SoTP valuation, we opined that Didi is fairly valued at the IPO price range.   
Our relative valuation suggests that the IPO price is full. Updating for the final IPO raise and the latest peer multiples, our SoTP valuation is $13.54 per ADS, which is marginally below the IPO price of $14 per ADS. Consequently, we would take profits on any meaningful first day IPO pop.


Global TMT analyst with Asia ex-Japan focus.

Mitchell Kim

<a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Chuxing (DIDI US)</a> raised USD4.4 billion today, pricing the IPO at the top of its indicated range and selling more shares than initially planned, according to Reuters.  This constitutes a USD67.5 billion valuation on a non-diluted basis and USD73 billion fully diluted. While this IPO was well oversubscribed, there are 3 reasons why I would be cautious on the stock:<ol>
<li>Why should I be overjoyed at receiving my IPO allotment when I am paying a 31% premium to Uber and 47% to Lyft on FY21 EV/Sales even though they are expected to grow faster than Didi?  </li>
<li>Didi appears to be cheap by using EV/sales, but not so if platform revenue is used.  Uber and Lyft’s revenues are net of payments to drivers.  Using Didi's platform revenue multiple, its IPO price is not so cheap.  </li>
<li>Didi’s gross transaction value (GTV) per transaction is only 27% of Uber’s. Why?  Because taxi fare in Beijing is 75% cheaper than NYC’s rate.  Uber’s GTV in 1Q21 was USD19.5 bn, Didi’s USD1.2 bn. Didi’s market cap on a fully diluted basis is USD73 bn, Uber USD95 bn.</li>
</ol>

DiDi Chuxing (DIDI US) raised USD4.4 billion today, pricing the IPO at the top of its indicated range and selling more shares than initially planned, according to Reuters.  This constitutes a USD67.5 billion valuation on a non-diluted basis and USD73 billion fully diluted. While this IPO was well oversubscribed, there are 3 reasons why I would be cautious on the stock:
Why should I be overjoyed at receiving my IPO allotment when I am paying a 31% premium to Uber and 47% to Lyft on FY21 EV/Sales even though they are expected to grow faster than Didi?  
Didi appears to be cheap by using EV/sales, but not so if platform revenue is used.  Uber and Lyft’s revenues are net of payments to drivers.  Using Didi's platform revenue multiple, its IPO price is not so cheap.  
Didi’s gross transaction value (GTV) per transaction is only 27% of Uber’s. Why?  Because taxi fare in Beijing is 75% cheaper than NYC’s rate.  Uber’s GTV in 1Q21 was USD19.5 bn, Didi’s USD1.2 bn. Didi’s market cap on a fully diluted basis is USD73 bn, Uber USD95 bn.


Didi Chuxing (DIDI US): Avoid Buyers' Remorse - Do an Apples to Apples Comparison

Equity Analyst, LightStream Research

Shifara Samsudeen, FCMA, CGMA

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

The Chinese ride hailing giant <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Chuxing (DIDI US)</a>  has priced its IPO at US$14 per ADS, at the upper end of the IPO price range of US$13-14 per ADS. Didi will raise approx. US$4.0bn at the above price of US$14 per ADS at a market capitalisation of US$67.0bn and a post-money enterprise value of US$56.0bn. According to Reuters and Bloomberg, Didi has upsized its deal to 317m ADSs from the original plan of selling 288m ADSs which would raise approx. US$4.4bn.In our previous insights on the company's IPO, we examined Didi’s business model, financials, outlook and valuation. We have also discussed in detail the ongoing Chinese regulatory probe on Didi and how it could impact its IPO and valuation.

The Chinese ride hailing giant DiDi Chuxing (DIDI US)  has priced its IPO at US$14 per ADS, at the upper end of the IPO price range of US$13-14 per ADS. Didi will raise approx. US$4.0bn at the above price of US$14 per ADS at a market capitalisation of US$67.0bn and a post-money enterprise value of US$56.0bn. According to Reuters and Bloomberg, Didi has upsized its deal to 317m ADSs from the original plan of selling 288m ADSs which would raise approx. US$4.4bn.In our previous insights on the company's IPO, we examined Didi’s business model, financials, outlook and valuation. We have also discussed in detail the ongoing Chinese regulatory probe on Didi and how it could impact its IPO and valuation.

Didi Chuxing IPO: Thoughts on First Day Trading

Alpha-Centric ESG Research

Kyle Rudden

This is a pre-IPO ESG assessment of <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Chuxing (DIDI US)</a>, China's leading ride-hailing platform. DiDi is set to finalise its US$4 billion IPO at an implied valuation of US$65 billion – the largest IPO of a Chinese issuer on a U.S. exchange since Alibaba's (BABA US) US$25 billion IPO in 2014.Impressive, except for one minor nuance. That US$65 billion is less than DiDi's earlier expectations of US$100 million, despite strong interest. Economic factors (e.g., growth rates, profitability) had a lot to do with the lower valuation. Regulatory risk and uncertainty probably factored in as well.Therein lies the quandary of this ESG analysis. Regulatory risk and uncertainty.DiDi is committed to corporate social responsibility, and its ESG performance is strong (though not perfect) in critical areas under its control. DiDi is reducing emissions, improving safety, rooting out corruption, and is lightyears ahead of its peers on gender equality and empowerment of women.DiDi is doing all the right things, where it has some semblance of direct control.But then, there's that quandary. DiDi's ESG achievements are overshadowed by regulatory risks and uncertainty, all beyond DiDi's control. Nearly concerning enough to justify a bearish imperative but the "control" issue – proactive ESG positives, versus passive ESG negatives – ultimately won out.

This is a pre-IPO ESG assessment of DiDi Chuxing (DIDI US), China's leading ride-hailing platform. DiDi is set to finalise its US$4 billion IPO at an implied valuation of US$65 billion – the largest IPO of a Chinese issuer on a U.S. exchange since Alibaba's (BABA US) US$25 billion IPO in 2014.Impressive, except for one minor nuance. That US$65 billion is less than DiDi's earlier expectations of US$100 million, despite strong interest. Economic factors (e.g., growth rates, profitability) had a lot to do with the lower valuation. Regulatory risk and uncertainty probably factored in as well.Therein lies the quandary of this ESG analysis. Regulatory risk and uncertainty.DiDi is committed to corporate social responsibility, and its ESG performance is strong (though not perfect) in critical areas under its control. DiDi is reducing emissions, improving safety, rooting out corruption, and is lightyears ahead of its peers on gender equality and empowerment of women.DiDi is doing all the right things, where it has some semblance of direct control.But then, there's that quandary. DiDi's ESG achievements are overshadowed by regulatory risks and uncertainty, all beyond DiDi's control. Nearly concerning enough to justify a bearish imperative but the "control" issue – proactive ESG positives, versus passive ESG negatives – ultimately won out.

Pre-IPO ESG Analysis: DiDi's Exemplary ESG Achievements Eclipsed By Regulatory Risks and Uncertainty

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<div class="content-highlight">
Our base case valuation of <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Chuxing (DIDI US)</a> is implied market cap of $99 billion or target price of $20.4 per share. This represents a 46% upside to the high end of the IPO price range of $14 per share. Given the excellent upside, we continue to maintain a positive view of Didi Chuxing. 
At the high end of the IPO price range of <a href="https://www.scmp.com/business/article/3138683/chinese-ride-hailing-giant-didi-chuxing-plans-raise-us4-billion-us-ipo" target="_blank" rel="noopener">$14 per share,</a> the company would be valued at $67 billion, which is 8% higher than its last private market fundraising valuation of $62 billion in 2019.
The fact that Didi Chuxing is getting priced at much lower levels than what the company was contemplating in early 2021 also suggests increasing investors' concerns about the Chinese government's potential anti-trust related crackdown combined with weaker IPO environment globally in 2021 versus 2020. 
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Our base case valuation of DiDi Chuxing (DIDI US) is implied market cap of $99 billion or target price of $20.4 per share. This represents a 46% upside to the high end of the IPO price range of $14 per share. Given the excellent upside, we continue to maintain a positive view of Didi Chuxing. 
At the high end of the IPO price range of $14 per share, the company would be valued at $67 billion, which is 8% higher than its last private market fundraising valuation of $62 billion in 2019.
The fact that Didi Chuxing is getting priced at much lower levels than what the company was contemplating in early 2021 also suggests increasing investors' concerns about the Chinese government's potential anti-trust related crackdown combined with weaker IPO environment globally in 2021 versus 2020. 


United States

Lyft, Inc. provides online ridesharing services. The Company offers ride booking, payment processing, and car transportation services. Lyft serves customers in the United States.

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Lyft (LYFT US)

DiDi Global IPO: Trading Debut

Didi has priced its IPO at $14 per ADS and sold 10% more ADSs than planned. Our relative valuation and SoTP valuation suggests a full price. We...

Arun George

Didi Chuxing (DIDI US): Avoid Buyers' Remorse - Do an Apples to Apples Comparison

DiDi IPO raised USD4.4 bn today, pricing at the top of its indicated range and selling more shares than initially planned. I offer three reasons...

Mitchell Kim

Didi Chuxing IPO: Thoughts on First Day Trading

The attractive IPO pricing and oversubscription by multiple times suggest that Didi’s shares are set for a strong open at its debut. Investors who...

Shifara Samsudeen, FCMA, CGMA

Pre-IPO ESG Analysis: DiDi's Exemplary ESG Achievements Eclipsed By Regulatory Risks and Uncertainty

DiDi boasts positive ESG achievements in areas under its control, but there's a big ESG issue beyond its control – regulatory risk. But, proactive...

Kyle Rudden

Didi Chuxing IPO Valuation Analysis

Our base case valuation of DiDi Chuxing is implied market cap of $99 billion or target price of $20.4 per share. This represents a 46% upside to...

Douglas Kim

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