Didi’s business deteriorates sharply following China probe

Chinese ride-hailing group Didi Chuxing’s business has declined rapidly as losses balloon and the company burns through the $4.4bn raised in its New York initial public offering just months ago.

Didi’s operating losses widened to $6.3bn in the first nine months of the year and its total revenues fell 2 per cent in the third quarter compared with the same period a year earlier.

The losses came after Chinese authorities forced Didi to stop signing up new users and required domestic app stores to remove more than two dozen of the company’s services days after its June IPO.

The figures marked investors’ first opportunity to see how the ride-hailing group has held up in the face of a government investigation into its data security practices, and the results underscored the blow to Didi’s business from the penalties.

Government data have shown that Didi’s ride count declined after its apps were taken down, but the company disclosed on Thursday that its China ride-hailing revenues fell 13 per cent in the three months to the end of September from the previous quarter.

The financials are “very bad”, said Li Chengdong of internet think-tank Haitun. “New users can’t use Didi and old users who get new phones also can’t download it,” he said. “The pandemic resurgence also has an impact.”

The regulatory scrutiny has forced the company to plan a retreat from US markets just months after its New York Stock Exchange offering in favour of pursuing a listing in Hong Kong.

Beijing’s campaign has also decimated Didi’s share price, which is down more than 60 per cent since the IPO, shedding about $38bn in stock market capitalisation.

The company recently blocked employees from selling their shares indefinitely, but Didi’s early investors have been able to exit their stakes since Monday. The company’s share price is down 12 per cent this week.

Didi also announced that Daniel Zhang, chief executive of Alibaba, had stepped down from its board and would be replaced by a lawyer from the ecommerce group.

The government’s investigation of Didi has dragged on for months, halting the flow of other Chinese companies to US markets while spurring authorities to deepen their efforts to rein in the country’s big tech groups.

As a foreign group listed in the US, Didi is not obliged to report quarterly earnings and has published its second and third-quarter results together.

The results showed that Didi’s cash position was also slipping. The company had $7.2bn of cash and timed bank deposits on its balance sheet at the end of March and raised at least $4.3bn in its June share sale. But by the end of September, Didi’s accounts showed it had only $9.5bn.

The company recorded a $1.4bn operating loss in the third quarter.

Didi has attempted to diversify from ride-hailing in recent years but the earnings release showed its spin-offs into other business lines also faced mounting challenges.

The company wrote down the value of Chengxin, its community group-buying business, by $3.2bn. The division has been laying off workers and shrinking its business since the summer.