Didi’s Stock Still Remains in the Twilight Zone

Didi has lost almost two-thirds of its market value since its IPO.


Photo:

tingshu wang / Reuters

Didi investors finally get a clear picture of the company’s finances after the Chinese ride-hailing giant’s fateful race against Beijing. It’s not a pretty picture.

The company said Wednesday that its revenue for the three months ended September down 11% qoq: reported its first earnings since the company went public in New York in June. Didi went public against warnings by regulators, triggering an investigation. Cybersecurity leads to many of its apps being removed from the app stores. The company has lost nearly two-thirds of its market value since its IPO, hitting a new low this week.

Didi’s operating loss last quarter was about 9 billion yuan, or $1.4 billion, compared with 1.1 billion yuan a year earlier. It posted an even bigger operating loss in the June quarter, but that was mainly because the company calculated more stock-based compensation costs due to the IPO. Excluding those, Didi’s operating loss for the September quarter would have nearly tripled from the previous quarter.

Its other businesses are also being affected. It recorded an investment loss of $3.2 billion in the September quarter, mainly because it recorded a decrease in the value of its community group buying business. That resulted in a $4.7 billion net loss for the quarter.

The company is unprofitable and burning cash – the net cash used for operating activities last quarter was $785 million. That’s typical of growth tech stocks – but now there’s no growth.

Didi earlier this month proposed delisting from the New York Stock Exchange and instead listing in Hong Kong, in a move to appease regulators. Unfortunately, that may not be that simple. The firm choose New York instead of Hong Kong in part because it has previously been unable to meet some of its requirements – in particular its ride-hailing business is fully compliant and fully licensed in all of its provinces and cities. China where it operates. Didi will have to resolve any disagreements with the exchange immediately to ensure a speedy listing.

The use of ambiguous language in Beijing’s regulations is not good for Didi. Hong Kong is a potential route out of the twilight zone – but until the company shows a solid path to growth again and gets Beijing’s good interest, investors may not be able to afford it. it would be wiser to not catch the bottom.

Write letter for Jacky Wong at jacky.wong@wsj.com

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Ian Walker

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