Transportation

Why is Didi worth so much less than Uber?

Comment

didi
Image Credits: STR/AFP / Getty Images

Years ago, U.S. ride-hailing giant Uber and its Chinese rival Didi were locked in an expensive rivalry in the Asian nation. After a financially bruising competition, Uber sold its China-based business to Didi, focusing instead on other markets.

The two companies are coming head-to-head again, however, as Didi looks to list in the United States. The company’s IPO filing was big news for the SoftBank Vision Fund, Tencent and Uber, thanks to its stake in Didi from its earlier transaction.

But Didi appears set to be valued at a discount to Uber. By several tens of billions of dollars, it turns out. And we can’t quite figure out why.

This week, Didi indicated that it will target a $13 to $14 per-share IPO price, with each share on the U.S. markets worth one-fourth of a Class A share in the company. In more technical language, each ADR is 25% of a Class A ordinary share in Didi, if you prefer it put like that.

With 288 million shares to be sold in its U.S. IPO, Didi could raise as much as $4.03 billion, a huge sum.

What’s Didi worth at $13 to $14 per ADR? Using a nondiluted share count, Didi is valued between $62.3 billion and $67.1 billion. Inclusive of shares that may be issued thanks to vested options and the like, Didi could be worth as much as $70 billion; Renaissance Capital calculates the company’s midpoint valuation using a fully diluted share count at $67.5 billion.

Regardless of which number you prefer, Didi is not set to challenge Uber’s own valuation. Yahoo Finance pegged Uber at $95.2 billion as of this morning.

Why is the Chinese company worth less than its erstwhile rival? Let’s dig around in their numbers and find out.

Didi versus Uber

As a reminder, Uber’s Q1 2021 included adjusted revenues of $3.5 billion, a gain of 8% compared to the year-ago quarter. Uber’s adjusted EBITDA came in for the period at -$359 million.

In contrast, Didi landed RMB42.163 billion in Q1 2021 revenue, or $6.52 billion at recent exchange rates — the company calculates the figure at $6.4 billion using a slightly different exchange rate. Didi had net income of $835.6 million in the quarter, far superior to Uber’s inability to generate even adjusted profitability in its most recent quarter.

Didi also grew more rapidly in the first quarter than Uber did, expanding top line by more than 100% from a pandemic-impacted Q1 2020; recall that COVID-19 first hit the Chinese market, later spreading to more global lockdowns. So, to see a Chinese transit unicorn take a large hit in the first three months of 2020 is not a surprise. It also means we have to asterisk its Q1 2021 growth when measured on a year-over-year basis.

Why is Didi worth less, at least in terms of its current IPO price range, than Uber if it is larger and more profitable? Perhaps international concentration. Uber is more globally diversified than Didi, which generated a slim 2% of its revenues from international incomes. And Didi is more concentrated on its Chinese mobility business than Uber is focused on its own domestic ride-hailing effort.

Uber’s delivery business is huge and growing quickly. That could give investors hope for extensive future growth at the U.S. company. In contrast, here’s what Didi had to say about its “Other Initiatives” segment, regarding the first quarter of 2021:

Total segment revenues of our Other Initiatives segment increased by 180% from RMB0.8 billion for the three months ended March 31, 2020 to RMB2.1 billion (US$0.3 billion) for the three months ended March 31, 2021, primarily due to the growth of our bike and e-bike sharing services as well as the growth of revenues from new initiatives that we launched in 2020. The revenues of our bike and e-bike sharing services increased by 212% from RMB0.3 billion for the three months ended March 31, 2020 to RMB0.9 billion (US$0.1 billion) for the three months ended March 31, 2021.

Didi does have some food delivery efforts, but they are baked into its international revenue line item — and therefore nascent.

So, Uber is more diversified both geographically and in terms of its revenue mix. Didi is larger, more profitable and more concentrated. That may explain some of the differential — diversification can be a good thing. But consider the following revenue multiples for both companies at their Q1 2021 run rates:

  • Uber: 6.8x Q1 2021 run rate (using its adjusted revenue figure to discount for single-quarter weirdness relating to the U.K. market).
  • Didi: 2.7x Q1 2021 run rate (calculated using the largest valuation result we felt comfortable using).

That differential is tectonic; Uber’s revenue is valued at more than 2x what Didi’s is on a per-dollar basis.

The dynamic raises some interesting questions:

  • Are investors more bullish about global growth than what the Chinese can muster?
  • Are investors more concerned about competition in the Chinese mobility segment than in Uber’s more global market?
  • Are we seeing Chinese companies trade at a discount to U.S. peers due to concern regarding an increasingly active and domineering government in the Asian nation?

You can add your own questions, of course, but there’s something afoot in the Didi deal that I can’t quite figure out. Why is it comparatively cheap? Perhaps we’ll learn more when it finally prices.

Despite flat growth, ride-hailing colossus Didi’s US IPO could reach $70B

More TechCrunch

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets

Featured Article

Two Santa Cruz students uncover security bug that could let millions do their laundry for free

CSC ServiceWorks provides laundry machines to thousands of residential homes and universities, but the company ignored requests to fix a security bug.

17 hours ago
Two Santa Cruz students uncover security bug that could let millions do their laundry for free

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

TechCrunch Disrupt 2024 is just around the corner, and the buzz is palpable. But what if we told you there’s a chance for you to not just attend, but also…

Harness the TechCrunch Effect: Host a Side Event at Disrupt 2024

Decks are all about telling a compelling story and Goodcarbon does a good job on that front. But there’s important information missing too.

Pitch Deck Teardown: Goodcarbon’s $5.5M seed deck

Slack is making it difficult for its customers if they want the company to stop using its data for model training.

Slack under attack over sneaky AI training policy

A Texas-based company that provides health insurance and benefit plans disclosed a data breach affecting almost 2.5 million people, some of whom had their Social Security number stolen. WebTPA said…

Healthcare company WebTPA discloses breach affecting 2.5 million people

Featured Article

Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Microsoft won’t be facing antitrust scrutiny in the U.K. over its recent investment into French AI startup Mistral AI.

19 hours ago
Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Ember has partnered with HSBC in the U.K. so that the bank’s business customers can access Ember’s services from their online accounts.

Embedded finance is still trendy as accounting automation startup Ember partners with HSBC UK

Kudos uses AI to figure out consumer spending habits so it can then provide more personalized financial advice, like maximizing rewards and utilizing credit effectively.

Kudos lands $10M for an AI smart wallet that picks the best credit card for purchases

The EU’s warning comes after Microsoft failed to respond to a legally binding request for information that focused on its generative AI tools.

EU warns Microsoft it could be fined billions over missing GenAI risk info

The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday.  The trustee is asking…

A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites ‘gross mismanagement’

U.K.-based Seraphim Space is spinning up its 13th accelerator program, with nine participating companies working on a range of tech from propulsion to in-space manufacturing and space situational awareness. The…

Seraphim’s latest space accelerator welcomes nine companies

OpenAI has reached a deal with Reddit to use the social news site’s data for training AI models. In a blog post on OpenAI’s press relations site, the company said…

OpenAI inks deal to train AI on Reddit data

X users will now be able to discover posts from new Communities that are trending directly from an Explore tab within the section.

X pushes more users to Communities

For Mark Zuckerberg’s 40th birthday, his wife got him a photoshoot. Zuckerberg gives the camera a sly smile as he sits amid a carefully crafted re-creation of his childhood bedroom.…

Mark Zuckerberg’s makeover: Midlife crisis or carefully crafted rebrand?

Strava announced a slew of features, including AI to weed out leaderboard cheats, a new ‘family’ subscription plan, dark mode and more.

Strava taps AI to weed out leaderboard cheats, unveils ‘family’ plan, dark mode and more

We all fall down sometimes. Astronauts are no exception. You need to be in peak physical condition for space travel, but bulky space suits and lower gravity levels can be…

Astronauts fall over. Robotic limbs can help them back up.

Microsoft will launch its custom Cobalt 100 chips to customers as a public preview at its Build conference next week, TechCrunch has learned. In an analyst briefing ahead of Build,…

Microsoft’s custom Cobalt chips will come to Azure next week

What a wild week for transportation news! It was a smorgasbord of news that seemed to touch every sector and theme in transportation.

Tesla keeps cutting jobs and the feds probe Waymo

Sony Music Group has sent letters to more than 700 tech companies and music streaming services to warn them not to use its music to train AI without explicit permission.…

Sony Music warns tech companies over ‘unauthorized’ use of its content to train AI

Winston Chi, Butter’s founder and CEO, told TechCrunch that “most parties, including our investors and us, are making money” from the exit.

GrubMarket buys Butter to give its food distribution tech an AI boost

The investor lawsuit is related to Bolt securing a $30 million personal loan to Ryan Breslow, which was later defaulted on.

Bolt founder Ryan Breslow wants to settle an investor lawsuit by returning $37 million worth of shares

Meta, the parent company of Facebook, launched an enterprise version of the prominent social network in 2015. It always seemed like a stretch for a company built on a consumer…

With the end of Workplace, it’s fair to wonder if Meta was ever serious about the enterprise

X, formerly Twitter, turned TweetDeck into X Pro and pushed it behind a paywall. But there is a new column-based social media tool in town, and it’s from Instagram Threads.…

Meta Threads is testing pinned columns on the web, similar to the old TweetDeck

As part of 2024’s Accessibility Awareness Day, Google is showing off some updates to Android that should be useful to folks with mobility or vision impairments. Project Gameface allows gamers…

Google expands hands-free and eyes-free interfaces on Android