Uber IPO: Will Baidu, Inc. (ADR) Force Uber to Go Public?

Uber-IPO-BaiduBIDU Stock Could Soar on Uber IPO

As rumors continue to fly about a possible Uber initial public offering (IPO), investors should carefully watch the share price of Baidu, Inc. (NASDAQ:BIDU). Baidu stock is trading at a steep discount this year, mainly because of China’s stock market crash. However, BIDU stock has massive upside if we finally see Uber stock on a public exchange. Here’s why.

Uber Technologies Inc. is the most highly capitalized startup in the world, but no amount of private cash will ever be enough. The ride-share app, which has grown at phenomenal rates, is now expanding internationally. Uber is everywhere from France to China.

An Uber IPO is a foregone conclusion; the only question is when. Judging by the part Baidu is playing in Uber’s story, my guess is they would rather it be sooner than later.

There are serious consequences for hesitation. Time is running short for Uber and competitors are closing in around them. The company is facing a long and devastating fight in China to break the stronghold of Didi Kuaidi.

As China’s leading taxi company, Didi Kuaidi is obviously reluctant to yield any market share. But unlike their North American peers, Didi Kuaidi is adapting to the modern world.

The company broke into the ride-share business to complement its taxi service, rather than simply crumbling underneath the mighty foot of Uber.

Baidu Stock Holders are Desperate for an Uber IPO

Baidu has pumped $2.2 billion into Uber to fund its campaign in China, bringing Uber China’s total worth to $8.0 billion. Overall, Uber is valued above $50.0 billion, tying it with Facebook Inc. for the highest valuations ever awarded to a startup. (Source: TechCrunch, September 7, 2015.)

Uber is also drawing off Baidu’s core strengths. After all, Baidu is to China what Google Inc. is to the rest of the world. And BIDU has also expanded out from its core function as a search engine, providing all manner of web-based services.

Baidu programmers are pairing their search and map features to Uber, making it easier for customers to find shops and services. There is true overlap between the companies.

An Uber IPO could reap huge benefits for BIDU stockholders. The company’s shares have fallen by more than 40% this year on a slowing Chinese economy, but Uber could draw some much-needed energy back to Baidu’s stock.

And on the flip side, Baidu’s mobile search brings in 500 million monthly users while Baidu Map helps direct 240 million people per month. Uber could make significant use of that kind of traffic. (Source: Bloomberg, December 17, 2014.)

Uber and BIDU vs. Didi Kuaidi and BABA

However, the Chinese internet is ruled by two other corporate titans: Alibaba Group Holding Limited (NYSE:BABA) and Tencent Holdings Ltd. If Baidu is Google, then Alibaba is a cross between Amazon.com and PayPal, and Tencent is a blend of Twitter and Sony.

Both BABA and Tencent have invested considerable sums in Didi Kuaidi. In fact, each company had a taxi business of their own, but merged them to form Didi Kuaidi.

Over all, Uber is facing an uphill battle if it wants to dominate China. Didi Kuaidi raised $3.0 billion from BABA and Tencent in recent months, bringing its valuation to over $16.0 billion.

More than 80% of the Chinese ride-share market belongs to rival Didi Kuaidi, but the fight is far from over.

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