Ride-hailing giant Didi Global (滴滴出行) said it would delist from the New York Stock Exchange just five months after its debut and pursue a listing in Hong Kong — having raised the ire of Chinese regulators for ignoring a request to put its US initial public offering (IPO) on hold.
Didi pushed ahead with its US$4.4 billion US IPO, despite being asked to suspend it while a review of the company’s data practices was conducted.
The Cyberspace Administration of China then quickly ordered app stores to remove 25 of Didi’s mobile apps and told the company to stop registering new users, citing national security and the public interest. Didi remains under investigation.
Photo: Reuters
“Following careful research, the company will immediately start delisting on the New York Stock Exchange and start preparations for listing in Hong Kong,” Didi said on Sina Weibo.
The company said it would ensure that its New York-listed shares would be convertible into “freely tradable shares” on another internationally recognized stock exchange.
The upending of Didi’s New York listing — likely to be a difficult and messy process — illustrates the huge clout that Chinese regulators possess and their emboldened approach to wielding it. Billionaire Jack Ma (馬雲) also ran afoul of Chinese authorities, leading to the dramatic scuppering of a mega-IPO for Ant Group (螞蟻集團) last year.
The move is also likely to further discourage Chinese firms from listing in the US and could prompt some to reconsider their status as US publicly traded companies.
“Chinese ADRs [American depositary receipts face increasing regulatory challenges from both US and Chinese authorities. For most companies, it will be like walking on eggshells trying to please both sides. Delisting will only make things simpler,” said Wang Qi (王崎), CEO at fund manager MegaTrust Investment (HK).
Sources have told Reuters that Chinese regulators pressed Didi’s top executives to devise a plan to delist from the New York Stock Exchange due to concerns about data security.
Didi is planning to proceed with a Hong Kong listing soon before embarking on a delisting from New York, sources with knowledge of the matter said.
It aims to complete a dual primary listing in Hong Kong in the next three months, and under pressure from Beijing, delist from New York by June next year, one of the sources said.
However, listing in Hong Kong might prove complicated.
One key challenge is whether the bourse would be willing to approve it, given that only 20 to 30 percent of the company’s core ride-hailing business in China is fully compliant with regulations requiring three permits, a source with knowledge of the matter said yesterday.
The source, who was not authorized to talk to media and declined to be identified, added that this had been the main obstacle to the company conducting an IPO in Hong Kong earlier.
Sources have also said that Didi is preparing to relaunch its apps in China by the end of the year in anticipation that Beijing’s cybersecurity investigation into the company would be wrapped up by then.
Didi made its New York debut on June 30 at US$14 per American depositary share, which gave the company a valuation of US$67.5 billion on a non-diluted basis. As of Thursday’s close, those shares have slid 44 percent, valuing it at US$37.6 billion.
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