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Chinese Ride-Hailing App Didi Seeks $2 Billion -- WSJ

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07/18/2019 | 02:50am EDT

By Julie Steinberg

China's dominant ride-hailing company Didi Chuxing Technology Co. is working to raise up to $2 billion from investors, according to people familiar with the matter, the latest sign that firms in the sector including Uber Technologies Inc. and Lyft Inc. are eager to raise money to fuel investments while posting steep losses.

The Beijing company plans to sell additional shares at the same price when it raised money in July 2018 from Booking Holdings Inc., the online travel company formerly known as Priceline, the people said. The company's valuation at that time couldn't be learned.

After the cash is injected from this round, the seven-year-old company is likely to have a paper valuation of around $62 billion, one of the people said. That is up from a valuation of $56 billion from a 2017 funding round.

Despite being the biggest player in China's ride-hailing market, Didi is still struggling to reach profitability as it faces smaller rivals; it expands into other forms of transportation businesses such as auto services, including leasing and vehicle maintenance; and it hires hundreds of employees to improve customer service.

Earlier this year a Didi executive said that for every ride in China it facilitated in the three months ended December, the company lost on average 2% of the fare paid. That means it cost the company $1.02 for every dollar generated from fares.

Didi's shareholders include some of the world's most valuable tech firms and investors -- SoftBank Group Corp., Apple Inc., Alibaba Group Holding Ltd. and Tencent Holdings Ltd. It isn't clear how current investors will respond to Didi's search for fresh funds. SoftBank and Tencent representatives declined to comment. Apple and Alibaba spokesmen didn't immediately comment.

Last year, Didi considered issuing a convertible bond, as well as launching an IPO. But it pulled back on both efforts after two female passengers were murdered, and the company focused on revamping its safety measures. An IPO isn't expected until at least next year, according to people familiar with the company.

Both Lyft and Uber flopped in trading after their initial public offerings earlier this year, testing investors' appetites for companies with big losses in an otherwise strong IPO market. Both companies continue to trade below their respective IPO prices, but have recovered from their lowest trading levels in May.

Uber reported an accumulated deficit of about $7.9 billion as of Dec. 31, while Lyft's was more than $2.9 billion, according to securities filings, and both have warned operating costs will rise as part of investments in their respective platforms.

Revenue growth for ride-hailing companies is expected to rise nearly 20% this year to $183.7 billion, with the U.S. being the world's largest market, according to analytics firm Statista. While ride-sharing continues to gain in popularity world-wide, growth is expected to slow in the years ahead.

At the new $62 billion valuation, Didi would rank in the top three private tech companies globally, after Ant Financial Services Group and Bytedance Ltd. The increase in valuation size is modest, reflecting the subdued atmosphere for tech companies, especially in China.

Uber, which owns 15.4% of Didi, implied in securities filings earlier this year that the Chinese firm was valued at $51.6 billion as of December. Uber in 2016 sold its operations in China to Didi in exchange for a minority stake in the company.

Didi is soliciting funds amid what people in the tech industry are calling a "capital winter," meaning it is difficult for Chinese companies to raise money. That has been especially true for those focused on consumers. After years of sky-high valuations and lackluster market performance for some IPOs, many Chinese tech companies have slowed their frenzied capital-raising and have focused on executing their business plans instead.

Didi had $7.7 billion in net cash after debt at the end of 2018, said a person familiar with the situation. The firm had $12 billion in cash reserves when it raised money in 2017, the Journal earlier reported.

The company has been spending on developing new technologies such as autonomous driving. Didi also has reached deals with car makers like Germany's Volkswagen AG and China's Guangzhou Automobile Group Co. to explore self-driving and other technologies or design vehicles for car-sharing.

--Yoko Kubota contributed to this article.

Write to Julie Steinberg at julie.steinberg@wsj.com

Stocks mentioned in the article
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ALIBABA GROUP HOLDING 1.05% 175.945 Delayed Quote.26.94%
APPLE 0.30% 207.8733 Delayed Quote.31.37%
BOOKING HOLDINGS INC 0.85% 1909.78 Delayed Quote.9.94%
GUANGZHOU AUTOMOBILE GROUP CO LTD -0.62% 8.04 End-of-day quote.5.51%
KUBOTA CORP 1.22% 1697.5 End-of-day quote.11.57%
NASPERS LIMITED 0.78% 3460.01 End-of-day quote.23.57%
PORSCHE HOLDING 4.27% 62.08 Delayed Quote.15.30%
SOFTBANK GROUP CORP 2.91% 5091 End-of-day quote.-27.32%
TENCENT HOLDINGS LTD 1.46% 361.8 End-of-day quote.14.93%
VOLKSWAGEN AG 4.02% 157.5 Delayed Quote.8.98%
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Financials (JPY)
Sales 2019 1 970 B
EBIT 2019 211 B
Net income 2019 151 B
Debt 2019 484 B
Yield 2019 2,16%
P/E ratio 2019 13,9x
P/E ratio 2020 13,3x
EV / Sales2019 1,30x
EV / Sales2020 1,25x
Capitalization 2 078 B
Duration : Period :
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Technical analysis trends KUBOTA CORP
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 18
Average target price 1 845,88  JPY
Last Close Price 1 701,00  JPY
Spread / Highest target 35,2%
Spread / Average Target 8,52%
Spread / Lowest Target -11,8%
EPS Revisions
Masatoshi Kimata President & Representative Director
Setsuo Harashima Manager-Finance
Shinji Sasaki Director, General Manager-Research & Development
Shigeru Kimura Director
Toshihiro Kubo Director
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