William Huston, AIF®, AIFA®

Didi reveals $4.7 billion loss ahead of HK launch in 2022

William Huston, AIF®, AIFA®

William Huston, AIF®, AIFA®

Didi reveals $4.7 billion loss ahead of HK launch in 2022

Didi Global Inc reported a $4.7 billion loss after revenue fell in the September quarter, exposing the rising costs of a series of regulatory actions that will force the China-based company to move its listing to Hong Kong next year.

Didi, one of the biggest targets in Beijing's campaign to rein in the country's huge tech sector, generated $6.6 billion in revenue, down 13% from the June quarter and down 1.6% from a year earlier. The unexpected happened as the company prepared to list its shares in New York.

The trucking giant plans to work with Goldman Sachs Group Inc, CMB International and CCB International on the turnaround, which could be a tender offer, people familiar with the matter said. The deal involves no fundraising, requires little marketing and will allow U.S. investors to exchange their shares for new stock in Hong Kong.

Once lauded for taking down Uber Technologies Inc. outside China, Didi became one of the main targets of Beijing's campaign to unleash Beijing's growing tech sector. But it infuriated regulators despite its New York debut despite concerns about its data security, prompting a flurry of investigations that led to its name being forcefully removed. Didi shares fell 3.6 percent in U.S. trading with the companies.

Didi's results once again demonstrate the Unpredictability Generated by the Chinese government's assault cont o Sector tecnolóxico Alibaba Group Holdings Ltd, the target of an antitrust investigation, reduced its revenue forecast for fiscal 2022 in November, mentres que o xigante da entrega de alimentos Meituan rexistrou a súa mayor perda desde 2018.

"Many investors clearly underestimated the impact of the regulatory reform. Justin Tang, Director of Asia Research at United First Partners. "Diddy's disclosure of the lost amounts may be a benchmark for investments. Sentiment remains low for these Chinese tech names and investments are focused on any reason to sell."

Didi's unprecedented delisting highlights Beijing's deep concern over the potential leak of confidential data from a geopolitical rival, as well as the extent to which the government will punish Didi for breaking the law. violates its wishes. In Wednesday's surprise revelation, the company announced that Alibaba's chairman, Daniel Chang, resigned from the board to be replaced by a low-ranking Alibaba executive.

Regulatory uncertainty increased Didi's costs of doing business and allowed competitors such as Meituan to encroach on its market share. Didi posted a net loss of 30.4 billion yuan in the September quarter, compared with a profit of 665 million yuan a year earlier.

What does Bloomberg Intelligence say?

Didi Global Inc.'s long-term growth outlook Obscured by Chinese regulators' crackdown on consumer data use, restrictions could hamper the ability to effectively expand its core mobile business and introduce new products. Its near monopoly in China's $50 billion car-sharing market, which is expected to double by 2025, is a solid foundation for growth, with demand for Didi able to overcome the legal situation. However, its international ridesharing and other initiatives may continue to spend money quickly.

Expectations of leaving the New York Stock Exchange and listing shares in Hong Kong point to a difficult path.

Spending rose 16% in the quarter after Didi was forced to respond to new requirements to better compensate drivers and improve data processing. Protection of drivers' labor rights was formalized in a set of guidelines issued by Chinese regulators in November. It also recorded an investment loss of 20.8 billion yuan, driven mainly by a start-up community group purchasing company focused on super-competitive, high-priced domestic food products.

It is unclear whether there will be further sanctions against Didi, which is controlled by Cheng Wei co-founder Jean Liu's management team and chairman, and backed by big names such as Alibaba and Tencent Holdings Ltd.

Beijing's actions against Didi are particularly harsh, even by the standards of a year-long crackdown that has gripped giants such as Alibaba and Tencent. China's cyberspace administration considered Didi's decision to publicly disclose a challenge to central government authority, prompting the Anti-Corruption Agency, Ministry of Public Security, Ministry of State Security and several other organizations to conduct a review. OSI Didi offices in July.




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