Didi reveals US$4.7b loss ahead of 2022 Hong Kong debut

[HONG KONG] Didi Global disclosed a US$4.7 billion loss after revenues shrank in the September quarter, revealing the rising cost of a series of regulatory actions that will force China's ride-sharing leader to shift its listing to Hong Kong next year.

Didi, one of the highest-profile targets of a broad Beijing campaign to rein in the country's giant tech sector, reported US$6.6 billion of sales, down more than 13 per cent from the June quarter and 1.6 per cent from a year earlier. The surprise disclosure comes as the company prepares to delist from New York.

The ride-hailing giant is planning to work with Goldman Sachs Group, CMB International and CCB International on the shift, which could be a so-called listing by introduction, people familiar with the matter said. That arrangement, which does not involve any fundraising, requires little marketing and would allow US investors to swap their shares for the new stock in Hong Kong.

Once hailed for ousting Uber Technologies from China, Didi has become one of the highest-profile targets of Beijing's campaign to rein in its increasingly powerful tech sector. But it incensed regulators after going ahead with the New York debut despite concerns about the security of its data, triggering a series of probes that culminated in the forced delisting. Its shares slid more than 8 per cent in New York, then extended losses in extended trading.

Didi's results again demonstrate the unpredictability generated by the Chinese government's assault against the tech sector, which broadened from online commerce and fintech initially to eventually encompass everything from social media to gaming and entertainment. Alibaba Group Holding, the target of an antitrust investigation, in November cut its fiscal 2022 revenue outlook while food delivery giant Meituan posted its widest loss since 2018.

"It's clear that many investors have underestimated the impact of the regulatory reforms," said Justin Tang, head of Asian research at United First Partners. "Didi's disclosure of its losses might be a benchmark for investors. Sentiment is still weak for these Chinese tech names and investors are focused on any reason to sell."

Didi's unprecedented delisting underscored the depth of Beijing's concern about the potential leakage of sensitive data to a geopolitical rival, as well as the extent to which the government will go to punish Didi for contravening its wishes. In Wednesday's surprise disclosure, the company announced Alibaba chairman Daniel Zhang had resigned from the board, to be replaced by a lower-ranking Alibaba executive.

BLOOMBERG