Didi starts to delist from New York and prepares for Hong Kong listing amid Beijing scrutiny
Didi starts to delist from New York and prepares for Hong Kong listing amid Beijing scrutiny

Didi starts to delist from New York and prepares for Hong Kong listing amid Beijing scrutiny

 

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Chinese ride-hailing giant Didi Global said it would start the process of delisting its stocks from the New York Stock Exchange and prepare for a listing in Hong Kong, as the company makes an unprecedented exit from the world’s largest capital market five months after Chinese regulators opened a probe into the firm.

“After careful consideration, the company will start the work of delisting from the NYSE and initiate preparation for listing in Hong Kong with immediate effect,” Didi Chuxing said in a one-line Chinese statement on its official Weibo account on Friday.

In a separate statement in English, Didi said the plan includes converting the American depositary shares (ADSs) from the NYSE “into freely tradable shares” on another exchange.

It added that the company will organise a meeting for shareholders to vote on the issue “at an appropriate time in the future”. Meanwhile, Didi is “pursuing a listing of its class A ordinary shares on the Main Board of the Hong Kong stock exchange.”

Didi did not state a reason for the delisting, but the decision comes after the Cyberspace Administration of China (CAC) opened a cybersecurity review of the company on July 2, two days after its $4.4 billion IPO in the US. Soon after, the CAC launched cybersecurity reviews into other companies and Beijing has introduced new rules for listing overseas.

Shortly after the probe was announced, Didi’s main app was barred from taking new customers, and dozens of its apps were eventually removed from app stores. A joint government consortium, which included the Ministry of State Security, later started conducting the investigation on company premises.

Shares of Didi slightly declined by 0.13 per cent to $7.8 on Thursday, before the announcement, nearly half its IPO price of $14.

Didi’s delisting is one of the more severe consequences of Beijing’s tightened scrutiny over the country’s technology sector, and it could have significant implications for Chinese tech firms seeking to list in the US, a popular market for such companies.

China’s crackdown on internet platforms has created a “climate of uncertainty and fear” because the process “has been non-transparent”, said Arthur Kroeber, the head of research at Gavekal. “Over time, this is going to have a negative effect on dynamism in the Chinese private sector.”

Beijing’s regulations for tech firms to pursue offshore IPOs have become much stricter since the CAC, China’s top internet watchdog, proposed an amendment in July to the “Measures for Cybersecurity Review”. The changes would require technology platform operators handling the data of more than 1 million users to apply for a review from the Cybersecurity Review Office, under the CAC, if they plan to list in a foreign market.

Last month, the CAC drafted another document asking for a cybersecurity review into mainland companies seeking Hong Kong IPOs.

Multiple mainland tech companies have cancelled or postponed IPO plans in the US amid increasing cybersecurity scrutiny. It’s been reported that Didi became the subject of a cybersecurity review because it had “forced its way” to a US listing even after the government expressed concerns.

Didi’s decision to delist also came as the Securities and Exchange Commission (SEC) adopted final amendments to its rules for implementing the Holding Foreign Companies Accountable Act of 2020 on Thursday.

The act requires foreign companies listed in the US to declare they are not owned or controlled by a foreign government and to have been available for inspection by the Public Company Accounting Oversight Board within the last three years.