Uber looking to sell stake in Didi given lack of transparency in Chinese market

In a statement the CEO of Uber Technologies Inc said, the company is looking to sell stakes its non-strategic stake in companies including in Beijing-based Didi Global Inc saying the lack of transparency makes the Chinese market tough.

In 2016, the US company had pulled out from the Chinese market after burning through more than a billion dollars a year due to a price war with Didi. Eventually, it sold its Chinese operations to Didi in exchange for a stake.

According to a filing by Didi this June. Uber has a stake of 12.8% in Didi.

“Our Didi stake we don’t believe is strategic. They’re a competitor, China is a pretty difficult environment with very little transparency,” said Uber’s Chief Executive Dara Khosrowshahi at a virtual fireside chat with a UBS analyst.

Khosrowshahi went on to add, Uber is in no rush to sell its stake in Didi.

“Those kinds of stakes we look to monetize smartly over time.”

“Many of the companies in which Uber has a stake have recently gone public and are still subject to a lockup period”, he said. “Uber would continue to hold some stakes for strategic reasons”.

Didi did not immediately respond to requests for comments.

With the news reaching the market, Uber’s shares rose by 4.3% to close at $37.26. Last week he said, while Uber had its best week ever in terms of company-wide gross bookings at its ride-hail and food delivery operations, overall, ride-hail trips continue to remain around 10% below pre-pandemic levels.

As of the end of this third quarter, Uber had around $13.1 billion tied up in investments in other companies, including $4.1 billion in Didi.

A few investors are concerned over Uber holding on to these stakes underscoring that such investments in other companies are more attractive than putting freed-up capital into its own operations.

For the very first time, Uber’s operational business turned black on an adjusted earnings basis; although its stake in Didi drove a $2.4 billion net loss in the third quarter.

Didi’s shares have been rattled by regulatory probes by China, revolving around its data practices, and are down by around 53% from their June 30 IPO prices. Under pressure from Chinese regulators, earlier this month Didi said it would withdraw from the U.S. stock exchange and pursue a Hong Kong listing. 

Categories: Creativity, Entrepreneurship, HR & Organization, Strategy

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