Didi Global Inc. plummeted on Tuesday morning after Chinese regulators ordered the company’s platform to be removed from app stores, just days after it raised $4.4 billion in the second-largest U.S. IPO for a Chinese startup.
The Beijing-based ride-hailing giant’s American depositary shares dropped as much as 25% to $11.58, wiping off roughly $22 billion in market value and bringing the company below its $14 IPO price. As of 9:35 a.m. in New York, they were trading for $11.99 each.
The Chinese Cyberspace Administration has blocked new users from using Didi’s app, citing security concerns and a desire to maintain control over sensitive internet data. Didi, whose American Depository Receipts (ADRs) began trading in New York on June 30, warned the move might hurt company income in China.
As the government halted Ant Group Company’s planned IPO in November, crackdowns on the country’s top IT brands have reduced the market value of companies listed on Nasdaq’s Golden Dragon China index by nearly $42 billion, reducing Chinese ADRs. went. is expected to be. Track. Alibaba Group Holding Ltd was sentenced to a record $2.8 billion after an antitrust investigation determined it had abused its market dominance, raising concerns about the sector’s future.
“The Chinese government’s actions appear to have the dual goals of keeping its business executives in line while also ensuring that investor suffering is concentrated in the United States rather than China,” said Michael O’Rourke, chief market strategist at JonesTrading.
For the time being, Didi’s half a billion existing customers will be able to request rides, but China’s cybersecurity actions add to the uncertainties surrounding the country’s Internet businesses. Tencent Holdings Ltd., which holds a stake in Didi, has lost 2.7 per cent so far this week in Hong Kong, after falling 3.6 per cent on Monday and recovering somewhat on Tuesday. After the closure of Asian markets on Friday, a series of government announcements started.
According to sources familiar with the situation, Chinese officials urged Didi to postpone its historic IPO in the United States by three months because of national security concerns over its massive data collection. Earlier, China’s antitrust regulator ordered Didi to stop engaging in activities such as unfair price hikes and misbehaving with drivers. It was one of 34 internet giants ordered by authorities in April to address the abuse.
Despite difficulties in other U.S.-listed equities, which do most of their business in China, and amid widespread antitrust investigations into the country’s Internet businesses, the number of Chinese companies registering for New York IPOs rose for the third consecutive quarter. increased. developed. The Golden Dragon China Index is down about 8% this year, trailing the Nasdaq Composite Index’s 14 percent rise.
“With Beijing now clearly attempting to make a political statement in the capital markets, it is unclear who, if any, would be willing to invest in China’s next mega public offering in the United States,” Charles – Henri Monchau, Chief Financial and Head Investment Officer at Flowbank SA in Geneva. “Investors are being treated unfairly by the move to crack down on Didi three days after the IPO. It would be better to prevent the firm from going public, as Ant Group did.”
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