Didi DD, That’s All, Folks
Due diligence, in this case, for porky pigs looking to get fat off of what could easily be the biggest IPO since Alibaba, will consist of evaluating the commercial potential of China’s ride-hailing service.
Institutional investors in the LehmanBush network are looking high and low for sizeable pre-IPO blocks of Didi shares at a valuation of $50b. Meanwhile, Reuters reported last month that Didi would be seeking a $100b valuation. The few sellers out there, in the meantime, are generally asking $60b, with hefty fees associated, and underwriters Goldman-Stanley prognosticate “$70b, maybe $100b”. Where’s the sweet spot?
“If I were an underwriter, I’d stick to the low side,” says Jimmie Jeremejev. “As an investor, I wouldn’t be surprised at all if Didi IPOs at north of $100b, then has a sharp dip. Chinese tech companies are simply super-hot right now, and we believe there will be a lot of hype around the IPO that will translate into a surprisingly high valuation.”
In support of the high-side are two relatively recent developments: a local government deal to test robo-driving services in Guangzhou, and its expansion of delivery services from eight to nineteen Chinese cities.
“Didi is at the cutting edge of ride-hailing’s potential,” says Edward Lehman. “But lets not forget that pigs get fed; hogs get slaughtered.”