Vision Fund’s 20.1% stake in the taxi app, for which it paid $ 11.8 billion in 2019, is now worth $ 7.8 billion after Chinese regulatory pressure affected business prospects of Didi, reducing its market value by almost half.
The Japanese group’s massive investment in the Chinese tech sector, which represents more than a quarter of the Vision Fund’s portfolio, has exposed it to the country’s changing regulatory winds.
Days after the launch of the Didi inquiry, Chinese cyberspace regulators turned to scrutiny from the Full Truck Alliance, backed by Vision Fund, causing its US-listed stocks to fall 43% since then. beginning of July.
Other Vision Fund investments in China are subject to regulatory pressure. Keep, the country’s most popular fitness app, recently withdrew its proposed IPO in the United States, while online education start-up Zuoyebang could be hit by debilitating restrictions on the model commercial of the home tutoring sector.
SoftBank began raising its stake in Didi in 2015 and marked up the value of a $ 900 million share tranche when it sold the stake to the Vision Fund in 2019.
The murders of two female passengers by Didi drivers in 2018 sparked a storm of public outrage and regulatory action against the company, and weighed on the start-up’s valuation and delayed its IPO for several years.
Didi’s app is a crucial lead generator for spinoff businesses such as his bike-sharing and community group shopping businesses, which SoftBank has also backed with hundreds of millions of dollars. SoftBank has also invested in Didi’s autonomous driving unit.
The Vision Fund at one point hoped to sell its stake in Didi in the U.S. public offering, which bankers and investors say could value the company up to $ 100 billion. But he put those plans aside as the start-up’s high valuation deflated, according to a person familiar with the matter. The fund declined to comment.
Even though the Vision Fund recorded a $ 4 billion paper loss on Didi, the value of many of its technology investments outside of China has skyrocketed with the boom in government procurement. Didi’s share price could also recover when its regulatory issues are addressed, although analysts and lawyers have warned that the investigation is unlikely to reach a quick conclusion.
The $ 100 billion Vision Fund was intended to diversify SoftBank’s geographic footprint, with founder Masayoshi Son recognizing the need to reduce the group’s strong exposure to China, particularly with its stake in Alibaba representing 43% of its equity holdings.
Alibaba shares are down 35% from their October high following the suspension of fintech firm Ant’s $ 37 billion IPO in November, which is said to have been the most important never recorded, and a campaign to “rectify” the government.
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Li Chengdong of tech-focused think-tank Haitun said valuations would fall as Hong Kong becomes the top listing location for Chinese tech companies.
“China is an important part of SoftBank’s global investment strategy, so this is all going to impact their returns on investment,” he said. “They could be the investor who takes the biggest blow from this set of regulations. ”
China’s State Security Ministry and six other government departments announced last week that they would send investigators to Didi’s offices to conduct a security investigation after the company went public in New York. against the will of the cyberspace regulator.
The Cyberspace Administration of China also removed Didi’s main ridesharing app and 25 connected services from domestic app stores and halted user registrations.
Additional reporting by Nian Liu in Beijing