June 24 (Reuters) – An initial public offering (IPO) by Chinese firm Didi Global Inc in New York City to raise up to $ 4 billion was fully hedged on day one of construction, though some investors feared that Stricter rules won’t hurt growth, sources with direct knowledge said.
The offering will be the largest sale of U.S. stocks by a Chinese company since Alibaba raised $ 25 billion in 2014 and is expected to be the largest IPO in the United States this year.
The ridesharing giant did not respond to a request for comment on its bookbuilding exercise, which will run until Tuesday, when prices will be set after the U.S. market closes, according to a condition sheet seen by Reuters. .
“Many investors still doubt that Didi can maintain a high growth rate for its core ridesharing business in China,” said a potential investor in a Hong Kong-based hedge fund who asked not to be identified as he did not was not allowed to speak to media.
“Its market share is already very high in the big cities, which means that there is little room for its future growth,” the source added.
“It is also difficult for the company to expand into lower-tier cities due to increasing competition from its competitors, let alone the potential impact of regulatory crackdown.”
Didi’s targeted valuation is below the initially expected range of $ 80 billion to $ 100 billion as potential investors have expressed concern about its growth prospects and the possibility of tighter regulation of Chinese tech companies, the sources said.
The valuation objective and the size of the increase were set after initial meetings with investors over the past two weeks.
Didi plans to start trading on Wednesday after a short investor tour for the highly anticipated IPO.
Didi has set a price range of between $ 13 and $ 14 per American Depositary Share (ADS), according to a regulatory filing released Thursday, and said it will offer 288 million of those shares on the IPO. At the top of the range, the transaction will bring in $ 4.03 billion.
This suggests an estimate ranging from $ 62.4 billion to $ 67.2 billion.
An over-allotment option could see the company sell an additional 43.2 million shares to raise up to an additional $ 605 million.
The terms of the deal suggest a cautious approach for Didi who, according to sources, had previously considered the higher valuation range.
The company’s valuation has surpassed $ 60 billion a year after it raised funds in 2017, sources said. Read more
The investor presentations, led by Didi Vice President and Head of Capital Markets David Xu, will run through Tuesday. The roadshow for an American ad of this size is shorter than the usual 10 days for most.
Morgan Stanley Investment Management has indicated interest in subscribing for up to $ 750 million of shares in the IPO and Singapore’s Temasek for $ 500 million, according to Didi’s updated prospectus.
Last week, Reuters reported that China’s market regulator opened an antitrust investigation into Didi, citing sources with knowledge of the matter. Read more
The State Administration for Market Regulation (SAMR) is investigating whether Didi used competitive practices that unfairly ousted smaller competitors.
It also examines whether the pricing mechanism used by Didi’s core business is sufficiently transparent.
At the time, Didi said he would not comment on unsubstantiated speculation from anonymous sources.
Report by Niket Nishant in Bangalore; Editing by Vinay Dwivedi
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