Business

Didi’s trip to the US just got tougher


Chinese ride-hailing giant Didi’s ride in public markets – and around regulatory hurdles – remains as tough as ever.

The latest official Salvo comes from the United States. That further increases the already established odds of a quick delisting and continuing to exist elsewhere. The stock’s bumpy downward path could continue.

The company is being investigated by the US Securities and Exchange Commission for matters related to June 2021 initial public release in New York, according to the company’s annual report it filed this week.

All in all, Chinese tech stocks have received a hit from Beijing: Government intends to halt regulatory campaign against them, The Wall Street Journal last week’s report. But Didi itself, apart from Ant Group – the most famous victim of Beijing’s hatred of the internet technology sector, remains in regulatory limbo at home and abroad.

Didi said it is cooperating with the SEC investigation, strictly following applicable Chinese laws and regulations. The company handling the situation itself isn’t really reassuring: “We cannot predict the timing, outcome or consequences of such an investigation.” Shares fell 7% in after-hours trading Tuesday.

Didi did not disclose further details about the poll. But gaps in pre-IPO disclosure are one area that could be investigated. The company did not tell investors that Chinese officials urged the company IPO delay because the government was worried about disclosing sensitive information in the offering documents. Beijing put Didi under cybersecurity review just days after its IPO, leading to a disastrous sell-off that has only gotten worse since. Didi shares are now only worth about 14% of what they were at the time of the IPO.

The renewed scrutiny from the US also comes as regulatory pressure from across the Pacific has yet to fully subside — comforting signals from Beijing about the intensity of its total tech crackdown aside. In December, the company said it would Looking to list in Hong Kong. But last month, Didi said it would delist in New York before seeking a public listing elsewhere, to cooperate with Beijing’s cybersecurity investigation.

Shareholders will vote on the delisting this month, but company executives and strategic investors like SoftBank and Tencent may have enough votes to pass. Ordinary investors who have already suffered huge losses may not be able to sell their shares for a long time when the company is delisted.

After Chinese ride-hailing giant Didi made its Wall Street debut, Beijing said it plans to tighten regulations for domestic companies looking to raise money abroad. WSJ’s Yoko Kubota accompanied Didi to explain what the crackdown means for China’s tech giants and investors. Artwork: Ang Li

Regulatory uncertainties also directly affect the company’s business. Didi’s revenue in the fourth quarter of last year down 12.7% over the same period last year because the company was banned from registering new users and their apps were removed from app stores in China. Lock Covid-19 in China’s major cities is rubbing salt in its wounds.

Like many other Chinese tech companies, Didi has come under fire from regulators in both China and the US over the past year. This latest action by the United States shows that the light at the end of the tunnel – if it does come – is still very dim and distant.

Write letter for Jacky Wong at [email protected]

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