The Business Times
Garage logo
UOB logoBEST DIGITAL NEWS START-UP, WAN-IFRA 2019 GOLD AWARD

Didi plunges below IPO price as China crackdown brings US pain

Published Tue, Jul 6, 2021 · 07:26 PM

[NEW YORK] Didi Global plunged Tuesday morning after regulators in China ordered the removal of the company’s platform from app stores, days after it raised $4.4 billion in the second-largest US initial public offering for a Chinese firm.

 American depositary shares of the Beijing-based ride-hailing giant fell as much as 25 per cent to US$11.58, wiping out about US$22 billion of market value and taking the stock below its US$14 IPO price. 

They traded at US$11.99 as of 9.35 am in New York. 

The Cyberspace Administration of China barred new users from Didi’s app, citing security risks and tightening its grip on sensitive online data. Didi, whose American Depository Receipts began trading in New York on June 30, said the move may have an “adverse impact” on its revenue in China.

"In terms of fundamental impact that (share price fall) is a bit harsh, in our view," said Sumeet Singh, Aequitas Research director who publishes on Smartkarma, told Reuters.

"But with some news sources saying that Didi knew months in advance that a crackdown was coming, some people will start to have their doubts on governance of the company as well."

A NEWSLETTER FOR YOU
Monday, 3.30 pm
Garage

The hottest news on all things startup and tech to kickstart your week.

The Wall Street Journal reported on Tuesday, citing sources, that the company was warned by regulators to delay the initial public offering (IPO) and examine its network security.

"And if the crackdown was indeed planned months in advance that would imply that it's not going away soon, which might explain the large share price correction," Mr Singh added.

"I think the recent Chinese regulatory actions against Chinese companies that have just listed in the US may raise a few eyebrows in Washington," David Chao, global market strategist at Invesco, told the Reuters Global Markets Forum.

"I don't think there will be a boycott of Chinese companies by US investors - many recently listed Chinese companies in the US have done very well."

A sharp sell-off in Didi shares would further dent confidence of its investors, who were shocked by the announcement of a probe into the ride-hailing firm just two days after its New York stock market debut.

"I think some investors may have taken comfort that going ahead with the listing was under the blessing of the authorities, when now we know it clearly wasn't," said Dave Wang, portfolio manager at Singapore's Nuvest Capital.

Nuvest did not participate in Didi's IPO.

BLOOMBERG, REUTERS

Read more: 

  • Investors may adjust China risk appetite after Didi crackdown

 

KEYWORDS IN THIS ARTICLE

BT is now on Telegram!

For daily updates on weekdays and specially selected content for the weekend. Subscribe to  t.me/BizTimes

Startups

SUPPORT SOUTH-EAST ASIA'S LEADING FINANCIAL DAILY

Get the latest coverage and full access to all BT premium content.

SUBSCRIBE NOW

Browse corporate subscription here