Didi, the 'Chinese Uber', leaves the New York Stock Exchange for Hong Kong after pressure from Beijing
Just five months after its IPO in New York, the technology company Didi, the main Chinese platform for shared transportation (with a model similar to that of Uber), announced this Friday its plans to withdraw from Wall Street and to prepare “ imminently” its IPO in Hong Kong. This is a 180º turn, with which the company founded by Will Cheng Wei in 2012 tilts the balance in favor of Chinese regulators, after almost half a year of tensions: following its debut on the US stock market, Beijing began a investigation into the company for alleged misuse of user data.
Despite the fact that the Chinese government has not revealed the result of the investigations against Didi, the company has communicated this Friday through its official Weibo account (the Chinese Twitter) that the decision has been made "after a thorough study", and that “it will begin the procedures to withdraw from the New York Stock Exchange and will begin the exit process on the Hong Kong stock exchange immediately.” In another message published on its website, it assures that the Board of Directors has authorized the decision and that a meeting of shareholders will be convened to vote on the proposal that "the securities listed in the US be convertible into freely negotiable shares of the company in another internationally recognized stock market”.
Didi Chuxing controls around 90% of the car sharing industry in the most populous nation on the planet and offers services in 16 countries. It is a giant in its sector, to the point of absorbing all the operations of the American Uber in China in 2016. It is estimated that, in the Asian giant alone, it has around 400 million active users and 13 million drivers annually.
“Didi shares may not be trading at the same value in Hong Kong. Everything indicates that this price will be lower, given that there will be strict control by the State over the use of users' personal data, ”says Shifara Samsudeen, an analyst at the Lightstream Research research center. “The government is alerting the internet industry in China to be ready for the possible increase in regulations. This will also have implications abroad: foreign investors are likely to be unwilling to buy Chinese tech stocks for a while,” he adds.
Here's how to prepare resume if you are aspiring for a job in the banking sector https://t.co/LYL4khRtaP
— IE Education Jobs Sun Aug 25 10:45:43 +0000 2019
According to a Reuters investigation, China had launched an antitrust probe into the company in June, before it went public. Despite alleged requests from the government to postpone the operation, the night before the Chinese Communist Party celebrated its centenary, Didi debuted on the US stock market raising some 4,400 million dollars (3,895 million euros) - the largest exit to Stock market on that parquet so far this year—and placing its market valuation at around 80,000 million dollars (70,819 million euros).
Two days later, the Cyberspace Administration of China launched an investigation into the company under the pretext of protecting "national security and public interest." Chinese regulators ordered the country's mobile app stores to remove the 25 Didi-operated apps, saying they violated "national laws and regulations, for improper data collection and misuse of user information." It also forced the company to block the registration of new members on its platform. Five months later, the company remains under investigation and since then the value of its shares has plummeted almost 45%.
Beijing has been putting the magnifying glass on its technology giants for months, a decision that has won both supporters and detractors. Analysts applaud the increase in regulation on the use of user data, while fears grow that the competitiveness of the sector will be damaged. After the Didi case, the US has tightened the requirements for Chinese companies that want to go public on Wall Street. Among the new measures, firms from this Asian nation are required to explicitly clarify whether they have government permission to list on the US stock market.
Nan Li, an associate professor at the Faculty of Finance at Shanghai Jiaotong University, believes that withdrawing from New York's trading floor "is the only option Didi has to survive." He adds that, however, “it can be a positive for Wall Street investors. He believes that Didi will not meet the necessary requirements to go public until it separates the services of the data platform and financial services, and establishes effective protocols to manage and guarantee that travel is safe and of quality”.
