From Bloomberg Gadfly, March 28:
Didi Chuxing looks set to put its shareholders in an impossible position by entertaining another round of fundraising, this time for $6 billion.And the Bloomberg story that came out last night (EDT):
SoftBank Group Corp. would lead the investment being considered by China's largest ride-hailing company, Bloomberg's Lulu Chen reported Tuesday.
That means current shareholders may be forced to decide whether to double down on their existing investment, or watch their bets get diluted by the new money. Such a dilemma faces investors every time a startup brings out the begging bowl.
New funding is usually welcome because it means more cash to get the business through the next phase in its development, compete with rivals and move closer to profitability. It typically has the added bonus of raising the startup's valuation, which makes everyone happy.
For Didi, though, it's a little different. As the product of two competitors merging, the company has vanquished its last credible threat. From there, the path to profitability should have been smooth, limiting the amount of cash it would have to burn to get to the IPO finish line.
Except such a conclusion assumes that the underlying business model is actually viable.
The distinguishing feature this time is that a massive pool of money is knocking on the door and wanting in. With its valuation already a heady $33.8 billion, any further escalation would limit the upside for investors in a future public offering, while a flat or down round would be a terrible move....MORE
Didi Said to Be Weighing $6 Billion SoftBank-Backed Funding