Cancel the IPO honeymoon... Celebrations didn't last long for Didi Chuxing. Last week, the Chinese ride-hail giant raised $4.4B in the largest US IPO of the year — and the biggest IPO by a Chinese company since ecomm giant Alibaba in 2014. Didi notched a $68B market cap on its first trading day (two-thirds of an Uber). But that's how it started.
Control > success... Five years ago, China might've hailed Didi's blockbuster IPO as a source of national pride. This year, China is driving the flops of its own biggest IPOs as it reminds tech companies who's in charge:
The theme has shifted for investors... It used to be: "Invest in China's growth opportunity." Now it's more like: "Invest in China at your own risk." Didi warned of this risk in its IPO filing, saying that if the Chinese government changes its interpretation of regulations or finds that Didi isn't compliant, the company could face "severe penalties." Zooming out, investors' opportunity is the growing size of China’s consumer market. The risk is the Chinese government's growing oversight.