Coatue Hedge Fund Bets on Didi, China’s Apple-Backed Uber Rival

Philippe Laffont’s Coatue Management LLC, which manages more than $7 billion, has backed China’s biggest ride-hailing app Didi Chuxing as it competes with Uber Technologies Inc.

Coatue participated in the Chinese firm’s $3 billion funding round last month through a co-investment vehicle, Laffont wrote in a letter to investors obtained by Bloomberg News. The size of the investment wasn’t disclosed. Apple Inc. also announced a $1 billion investment in Didi, which operates in 400 Chinese cities, Laffont wrote.

“We believe Apple’s investment in the company reaffirms our bullish stance on Didi as well as the prospects for the China ride-sharing market overall,” Laffont wrote in the letter. “We continue to believe that Didi represents one of the single best risk/reward dynamics within the technology space.”

Didi is targeting an initial public offering in New York next year, according to people familiar with the matter. The last funding round has swelled the company’s valuation to about $26 billion, people familiar have said.

Adds Paypal

Didi, already backed by Alibaba Group Holding Ltd. and Tencent Holdings Ltd., has reached break even in about half of the 400 cities it operates in, as Uber spends heavily to win both drivers and riders.

Coatue also added Paypal Holdings Inc. in the first quarter, betting that prices of technology, media and telecom stocks will be driven more by innovation than macroeconomic events, according to the letter.

Coatue’s flagship fund fell 2.5 percent in the first quarter while the MSCI World Index dropped 0.3 percent. It cut its short portfolio from 227 to 127 companies during the quarter.

"While never good enough, we are encouraged that our short portfolio is hanging in there in what continues to be a challenging environment for short-selling," the letter said.

--With assistance from Joshua Fineman and Arie Shapira To contact the reporters on this story: Jesse Riseborough in New York at jriseborough@bloomberg.net, Simone Foxman in New York at sfoxman4@bloomberg.net. To contact the editors responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net, Vincent Bielski, Alan Mirabella