Among the most disappointing initial public offerings (IPOs) of 2021, without a doubt, has been Chinese ride-hailing giant DiDi Global (NYSE:DIDI). Not long after DIDI stock debuted on the New York Stock Exchange, the share price declined and it hasn’t recovered yet.
It’s not difficult to figure out what caused this to happen. Mainly, DiDi’s problems have stemmed from Beijing’s regulatory crackdowns, which included a cybersecurity probe initiated by the Chinese government.
Chinese regulators have even prohibited new downloads of DiDi’s app, and are considering the DiDi U.S. IPO a “deliberate act of deceit.”
Yet, there may be signs that Beijing is ready to relax its restrictions on this embattled ride-hailing business. Besides, DiDi might soon expand its operations into a vast addressable market that’s far beyond China’s control.
A Closer Look at DIDI Stock
Going back to the beginning, DiDi’s U.S. IPO took place on June 30, and the stock began trading at $16.65 per share.
The share price stayed near $15 during the next couple of trading sessions. Then, unfortunately, the sellers took control of the price action.
Painfully, DIDI stock tanked during the summer, and even hovered near $7 for a while. As of early November, the shares were trading slightly above $8.
At the same time, DiDi’s trailing 12-month earnings per share was -$2.34. That’s problematic when the stock price is around $8.
In an alternative universe, where the Chinese government didn’t give DiDi so many problems, it’s possible that the company would have a much better earnings profile.
However, we have to deal with the real world and its issues. Therefore, the investors should consider $10 as a milestone to look forward to – if not in 2021, then hopefully early next year.
A Way Out?
Here’s an indication of how problematic things have gotten for DiDi.
The company’s most recent news posting (as of Nov. 6) is titled, “Didi Responds to Certain Market Speculation.”
Basically, the posting denies a report/rumor/allegation that DiDi is considering going private.
This undoubtedly provided little solace for concerned investors. What they need is a sign that China’s regulators will stop punishing DiDi for listing its shares in the U.S.
In an odd but promising turn of events, China’s Internet watchdog may have just offered DiDi a way out, and forward.
According to the Wall Street Journal, Beijing is wrapping up its cybersecurity investigations and the Cyberspace Administration of China suggested that DiDi explore a Hong Kong listing.
Apparently, Beijing is concerned that companies like DiDi, which store a lot of data, could present political or national security risks by answering to regulators in the U.S.
Furthermore, it would be less disruptive in the event of a U.S. delisting, if DiDi were already listed for trading in Hong Kong.
Meanwhile, Somewhere Far Away
Only time will tell whether DiDi takes the Chinese authorities up on their suggestion.
Perhaps we’re “burying the lede” here, though, as the real headline story with DiDi may be in the vast continent of Africa.
DiDi is reportedly expanding across Africa with preparations in progress to enter into Nigeria.
This wouldn’t be the company’s first foray into the continent, as DiDi has already commenced operations in South Africa and Egypt.
Notably, the company posted a job opening for a driver center manager in Lagos, Nigeria’s commercial capital.
Among the driver center manager’s responsibilities would be “to collaborate with operations and Didi’s team to support the successful launch.”
That certainly sounds like the company’s ready to plant its flag in Nigeria and start generating revenues there.
The Bottom Line
Chinese regulators are unpredictable, so heaven only knows what will happen with DiDi.
Still, at least it appears that Beijing might be offering DiDi a way to appease the government.
Just as importantly, the company is looking beyond China’s borders for potentially lucrative opportunities.
All in all, DIDI stock remains risky – but now there’s hope on the horizon, thank goodness.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.