Didi Shares Crash As Traders React To China’S Crackdown

Story Highlights
  • The company’s share price fell to $12.06 at 4:46 a.m. Tuesday in pre-market trading, down from $15.53 at the last market close.
  • The fall comes after China announced late Friday that new users in the country would not be able to download the app while it conducts a cybersecurity review of the company.
  • Traders, who couldn’t buy or sell the stock on Monday as markets were closed, reacted to the news Tuesday.

Despite the tensions, Chinese companies have already raised $12 billion in U.S. listings, according to data provider Refinitiv. Another $8 billion will be raised by Chinese firms in 2021, more than double the amount raised at the same time last year. But the size of those deals was cut in a briefing to investors before the IPOs, suggesting an increase in investor concern over China’s possible antitrust crackdown and a more volatile IPO environment in the coming year, said Douglas Kim, an independent analyst based in London who writes for Smartkarma.

Didi, which went public on Wednesday, is the largest U.S. stock offering since the debut of Chinese company Alibaba in 2014. Its IPO raised $4.4 billion, making it the second-largest share sale after Alibaba Group Holdings Ltd. went public in 2014. Didi’s upcoming debut marks one of the top 10 listings in the US over the past decade according to Dealogic, and the largest US IPO ever of a Chinese company on record.

Shares in China’s largest ride-hailing company ended their first trading day at $14.14 in New York, up 1% from their initial offering price of $14 a share. It climbed nearly 30 percent to a high of $18 in trading. According to Dealogic, Didi has raised $4.4 billion in the largest U.S. stock offering of a Chinese company since Alibaba’s debut in 2014, making it the largest Chinese IPO in the United States since Alibaba’s $25 billion offerings that same year.

Shares of Didi Global Inc slumped 25 percent in premarket U.S. trading on Tuesday, the first session since Chinese regulators had ordered the $44 billion stock listing a day before. A trader works on the NYSE floor during the initial public offering of Didier Global Inc on June 30, 2021 in New York City. The company’s apps were removed by the Cyberspace Administration of China (CAC) from mobile app stores in China on Sunday following an official investigation into Didi Global Inc.’s handling of customer data.

Didi’s comments came a day after China’s cyberspace regulator ordered app stores to stop selling Didi’s apps after it was found the company had collected user personal information. The company said the removal of its Didi Deluxe app from smartphone app stores across China is likely to have a negative impact on its revenue.

China’s cyberspace regulator did not specify the nature of Didi’s violations in a statement on its social media feed. It said it had instructed the company to make changes to comply with Chinese privacy rules. The removal of Didi’s app will have no impact on existing users and comes just days after the company debuted on the New York Stock Exchange with an initial public offering of $4.4 billion.

Didi responded by announcing that it would no longer register new users and remove the app from the App Store. The app can no longer be downloaded from China but anyone who has downloaded and installed the app can still use it, it said.

Didis’ share price fell 5.3% on Friday after the cybersecurity review was announced. The rally was crushed the next day when China’s Internet regulator banned the company from registering new users and said it was investigating alleged breaches of the users’ privacy. Traders did not buy or sell the stock on Monday after the market closed but reacted to the news on Tuesday.

The government said it had acted to prevent security risks and protect the public interest. The company responded with a statement in which it said it would fix the issues and protect users’ privacy and data security. On Sunday, authorities went another step further and removed the WeChat app from Apple and Android stores.

China’s Cyberspace Administration announced Monday that it has launched a cyber security review of truck logistics platform Huochebang Yunmanman and the head of online recruitment platform Zhipin. The Full Truck Alliance, which operates the truck logistics company Huoche bang (Yunmanman), and Kanzhun Ltd., which operates the recruitment platform Zhipin’s online recruitment site, are listed in the US. A comprehensive data protection law, adopted in June, requires companies and individuals to obtain the consent of relevant authorities before disclosing in China – stored data to foreign entities such as law enforcement agencies.

The latest regulatory crackdown comes after the Cyberspace Administration of China (CAC) ordered China’s App Store to remove the ride-sharing app Didi from download the day after it went public in the USA. Download our mobile app for iOS or Android to receive alerts for local breaking news and weather conditions. The cybersecurity review by Yunmanman Huochebang Company, a New York-listed full truck alliance and chief executive Zhipin, because it is not allowed to register new users.

They sent a strong message to Chinese companies that the state authorities pursue them wherever they operate and wherever their shares are traded. This article contains content from Shanghai and Hong Kong shares that slid sharply on Monday as tech companies suffered amid concerns over Beijing’s crackdown on ride-hailing giant Didi and global scrutiny of other Chinese platform companies. Two companies and three other Chinese platforms have listed shares in the United States.

Try updating your browser Hong Kong shares fall as tech weight on ride-hailing giant Didi Global app takedown, China Mix Video The Hang Seng Tech Index dropped 2.2% to its lowest level since mid-May. The sharp fall in Didis shares ahead of the reopening of US markets on Tuesday, July 6, could encourage investors to follow suit.

New York firm Rosen said Didis supplied misleading business information to investors during its IPO and invited investors to join a class action against the company. Rosen, a US law firm, reached a $250m settlement with Alibaba in a class action concerning similar claims related to disclosures during its $2.5bn initial public offering in 2014, the largest in the US by a Chinese company and one of the two largest IPOs ever. Rosen announced he was reviewing the lawsuit on July 4, shortly after it was revealed that China’s Cyberspace Administration had banned new downloads of the driving giant’s app and online store.

As discussed in Western reports, the IPO papers did not mention any regulatory developments that would make the current investigation appear predictable in retrospect. On June 11, the Internet regulator announced that more than 100 apps were under investigation for possible illegal data collection and use. The June list follows a previous list from May, which had 100 apps under similar scrutiny.

Content Protection by

Financial PostEconomic TimesNBC New YorkNY Times

Kunal Guha

Director, Founder and Editor in Chief
Back to top button