HONG KONG: Didi Global Inc shares dropped as much as 25% in early US trading on Tuesday (July 6) in the first session since Chinese regulators ordered the company’s app to be taken down days after its US$4.4 billion NASDAQ IPO. The Cyberspace Administration of China (CAC), which had claimed it was examining Didi’s handling of user data, ordered the ride-hailing giant’s app to be deleted from Chinese app stores on Sunday.
On Monday, the CAC launched cybersecurity probes against several Chinese companies whose parents have listed in the US, and the shares of those companies have also fallen.
Kanzhun was down approximately 12 percent and Full Truck Alliance was down nearly 18 percent.
Following the July 4 holiday, the US stock market was closed on Monday.
Didi Global shares were last trading at at US$11.97, down more than US$17 billion in market capitalization from Friday and significantly below their initial public offering price of US$16.65 on June 30.
Regulators had ordered the company to delay its initial public offering (IPO) and assess its network security, according to the Wall Street Journal, citing sources.
“With certain news sources claiming that Didi was aware of a crackdown months in advance, some individuals would begin to have issues about the company’s governance,” said Sumeet Singh, Aequitas Research director and Smartkarma contributor. “If the crackdown was planned months in advance, that means it isn’t going away very soon.” Didi said on Monday that the app’s restriction would impact its earnings in China, despite the fact that existing customers may still use it. It also informed Reuters that previous to the IPO, it was unaware of the probe. Didi’s initial public offering (IPO) generated US$14 billion, making it the largest IPO of a Chinese company in the US since Alibaba raised US$25 billion in 2014. As of Friday, the corporation was valued at up to US$75 billion.
After discovering that Didi had improperly acquired customers’ personal data, CAC stated it has instructed retailers to stop selling the app.
“Some investors may have taken comfort in the fact that the listing was approved by the government, when we now know it was not,” said Dave Wang, portfolio manager at Nuvest Capital in Singapore. Didi’s initial public offering (IPO) was not attended by Nuvest. According to market analysts, the news could have further repercussions. Mitchell Kim, a New York-based independent research analyst who writes for Smartkarma, told Reuters that he was concerned about regulatory overreach. “We have seen the Chinese government gradually tighten its grip over the new economy, particularly the Internet sector, during the previous few years.” “In light of some of the recent news, investors need to be looking at not just valuations of the company based on global opportunities, but keeping in the back of their minds that policies could go into effect and how will that affect companies here in the (United States),” Matthew Keator, managing partner of the Keator Group, a wealth management firm in Lenox, Massachusetts, said./n
