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Hong Kong — Ride-hailing giant Didi Global said it will delist from the New York Stock Exchange just five months after its debut and pursue a listing in Hong Kong — having raised the ire of Chinese regulators for ignoring a request to put its US initial public offering on hold.
Didi pushed ahead with its $4.4bn US IPO despite being asked to put it on hold while a review of its data practices was conducted.
The powerful Cyberspace Administration of China (CAC) then quickly ordered app stores to remove 25 of Didi's mobile apps and told the company to stop registering new users, citing national security and the public interest. Didi remains under investigation.
“Following careful research, the company will immediately start delisting on the New York Stock Exchange and start preparations for listing in Hong Kong,” Didi said on its Twitter-like Weibo account.
It did not explain its reasons for the plan but said in a separate statement that it would organise a shareholder vote at an appropriate time.
The upending of Didi’s New York listing — likely to be a difficult and messy process — illustrates both the huge clout that Chinese regulators possess and their emboldened approach to wielding it. Billionaire Jack Ma also ran afoul of Chinese authorities leading to the dramatic scuppering of a mega-IPO for Ant Group last year.
It will also likely further discourage Chinese firms from listing in the US and could prompt some to reconsider their status as US publicly traded companies.
“Chinese ADRs face increasing regulatory challenges from both US and Chinese authorities. For most companies, it will be like walking on eggshells trying to please both sides. Delisting will only make things simpler,” said Wang Qi, CEO at fund manager at MegaTrust Investment (HK).
Sources have told Reuters that Chinese regulators pressed Didi’s top executives to devise a plan to delist from the New York Stock Exchange due to concerns about data security.
Listing in Hong Kong might, however, prove complicated.
One key challenge is whether the bourse would be willing to approve it given that only 20%-30% of the company’s core ride-hailing business in China is fully compliant with regulations requiring three permits, a source with knowledge of the matter said on Friday.
The source, who was not authorised to talk to media and declined to be identified, added that this had been the main obstacle to the company conducting an IPO in Hong Kong earlier.
Didi did not immediately respond to Reuters requests for comment.
Sources have also told Reuters that Didi is preparing to relaunch its apps in China by the end of the year in anticipation that Beijing’s cybersecurity investigation into the company would be wrapped up by then.
The CAC did not immediately respond to a request for comment on Didi's plans to delist from New York.
Didi made its New York debut on June 30 at $14 per American Depositary Share, which gave the company a valuation of $67.5bn on a non-diluted basis. Those shares have since slid 44% until Thursday’s close, valuing it at $37.6bn.
Shares in Didi investor SoftBank Group fell 2% after the Didi announcement, also hurt by Southeast Asian ride-hailing giant Grab’s slump in its Nasdaq debut.
SoftBank’s Vision Fund owns 21.5% of Didi, followed by Uber Technologies with 12.8%, according to a filing in June by Didi.
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.