DiDi crackdown to affect Mirae Asset-Naver's investment

DiDi Chuxing logo / AFP-Yonhap

Mirae Asset-Naver acquired 0.5 percent stake of DiDi Chuxing in 2018

By Anna J. Park

As the Chinese internet regulator announced a surprise probe on whether to ban DiDi Chuxing's app from local app stores ― just two days after the ride-hailing firm's New York Stock Exchange debut ― investors in DiDi Chuxing are considering initiating an “exit strategy.”

Mirae Asset Securities has been investing in DiDi Chuxing since 2018, along with its strategic partner Naver, Korea's biggest tech portal.

Mirae Asset Securities and Naver jointly raised 280 billion won ($247 million) for the Mirae Asset Global Unicorn Fund, a private equity fund (PEF) which purchased a 0.5 percent stake in DiDi Chuxing equity back in March 2018. Mirae Asset Securities and Mirae Asset Capital ― the venture capital arm of Mirae Asset Group ― each invested 243 billion won and 10 billion won of their own capital, respectively, while Naver invested 18.4 billion won.

The investment was made when the Chinese vehicle platform firm had a corporate value standing at around $56 billion. The company's value increased to $62 billion at the pre-IPO stage; after its IPO debut at the end of last month, the firm's market cap rose to $74.46 billion as of last Friday's closing price.

The headquarters of Mirae Asset Financial Group in central Seoul / Courtesy of Mirae Asset Financial Group

Before the probe and reports of the possible ban on DiDi Chuxing's app by Chinese authorities, market watchers expected Mirae Asset and Naver to garner hundreds of billions of won of profit from the investment, anticipating DiDi Chuxing's corporate value could rise as high as $100 billion on the U.S. stock market in the foreseeable future. Up until the Chinese authority makes its move, the investment will have been considered as a success, which was expected to bring up to around a 100 percent return in profit.

However, DiDi Chuxing is alleged to be directly and intentionally involved in illegal collection and use of personal information. Mirae Asset's success in this investment into the global unicorn has consequently been put into question.

So far, Mirae Asset's PEF fund earned profits worth 93 billion won, or around a 33 percent of returns through the increase of DiDi Chuxing's acquired equity value, given last Friday's closing price of the company. Yet, even though the banning of the app would not affect existing users, only preventing new clients from registering on the platform, no one knows for sure as of now how much the market cap could further be negatively impaired, if a Chinese ban were to continue for the long term.

While Mirae Asset's Global Unicorn Fund has an expiration date set at 2028, a 10-year maturity since its inception, Mirae Asset Securities refused to give specific accounts about whether it made an early exit from DiDi Chuxing's IPO. But, given that Mirae Asset Securities first expected the investment period to be up to five years, it's highly unlikely the company has already exited from the investment.

“Due to a strategic stance, the company cannot confirm or reveal any position changes in the fund operation,” an official from Mirae Asset Securities responded.