Why is Didi worth so much less than Uber?

Years ago, U.S. ride-hailing giant Uber and its Chinese rival Didi were locked in an expensive rivalry in the Asian nation. After a financially bruising competition, Uber sold its China-based business to Didi, focusing instead on other markets.

The two companies are coming head-to-head again, however, as Didi looks to list in the United States. The company’s IPO filing was big news for the SoftBank Vision Fund, Tencent and Uber, thanks to its stake in Didi from its earlier transaction.

But Didi appears set to be valued at a discount to Uber. By several tens of billions of dollars, it turns out. And we can’t quite figure out why.

This week, Didi indicated that it will target a $13 to $14 per-share IPO price, with each share on the U.S. markets worth one-fourth of a Class A share in the company. In more technical language, each ADR is 25% of a Class A ordinary share in Didi, if you prefer it put like that.

With 288 million shares to be sold in its U.S. IPO, Didi could raise as much as $4.03 billion, a huge sum.

What’s Didi worth at $13 to $14 per ADR? Using a nondiluted share count, Didi is valued between $62.3 billion and $67.1 billion. Inclusive of shares that may be issued thanks to vested options and the like, Didi could be worth as much as $70 billion; Renaissance Capital calculates the company’s midpoint valuation using a fully diluted share count at $67.5 billion.

Regardless of which number you prefer, Didi is not set to challenge Uber’s own valuation. Yahoo Finance pegged Uber at $95.2 billion as of this morning.

Why is the Chinese company worth less than its erstwhile rival? Let’s dig around in their numbers and find out.

Didi versus Uber

As a reminder, Uber’s Q1 2021 included adjusted revenues of $3.5 billion, a gain of 8% compared to the year-ago quarter. Uber’s adjusted EBITDA came in for the period at -$359 million.