Just five months after its debut, riding health giant Didi Global said it plans to withdraw from the New York Stock Exchange and pursue a listing in Hong Kong, an impressive reversal as it bends against Chinese regulators who are angry over the US listing.
The company’s shares fell around 15% after fluctuating between gains and losses in pre-market trading, as investors initially bet that the move would appease Beijing and serve as a catalyst for a revival of the business outlook at home. The shares in the company plunged at the end of the day, closing down 22%.
“After careful investigation, the company will immediately begin delisting on the New York Stock Exchange and begin preparations for listing in Hong Kong,”[ads1]; Didi said on his Twitter-like Weibo account on Friday.
Didi did not explain the reasons for the plan, but said in a separate statement that it would organize a shareholder vote at an appropriate time and ensure that its New York-listed shares could be converted to “freely tradable shares” on another internationally recognized exchange.
Sources told Reuters last month that Chinese regulators had pressured Didi’s top executives to draw up a plan to delist from the New York Stock Exchange due to concerns about computer security.
Didi’s board met on Thursday and approved the plans for delisting the US and HK listing, said two sources with knowledge of the case.
Didi pushed ahead with a $ 4.4 billion IPO in the US in June, despite being asked to put it on hold while a review of computer practices was conducted.
The powerful Cyberspace Administration of China (CAC) then quickly ordered app stores to remove 25 of Didi’s mobile apps and asked the company to stop registering new users, citing national security and public interest.
Didi, whose apps, in addition to tour chat, offer products such as delivery and financial services, are still under investigation.
Redex Research analyst Kirk Boodry, who publishes on Smartkarma, said there is an expectation that Didi may need to buy shares at a listing price of $ 14 to avoid legal issues and will at least pay more than the share’s current trading price.
However, there was still uncertainty about what the delisting would mean for investors. “There may also be some hope that the Didi management by doing this will improve its regulatory conditions, but I’m less sure,” Boodry added.
The abolition of Didi’s listing in New York – probably a difficult and messy process – illustrates both the enormous influence of Chinese regulators and their courageous approach to using it.
Billionaire Jack Ma also ran aground with Chinese authorities after blowing up the country’s regulatory system, which led to the dramatic scrapping of a mega-IPO for Ant Group last year.
Dids move will likely further discourage Chinese companies from listing in the US and may lead some to reconsider their status as US listed companies.
“Chinese ADRs are facing increasing regulatory challenges from both the US and Chinese authorities. For most companies, it will be like walking on eggshells and trying to please both sides. Delisting will only make things easier,” said Wang Qi, CEO of fund manager MegaTrust Investment (HK).
Didi plans to continue with a listing in Hong Kong soon and is not looking to be taken privately, sources with knowledge of the case told Reuters.
It aims to complete a double primary listing in Hong Kong over the next three months and delete from New York by June 2022, said one of the sources.
The sources were not authorized to speak to the media and refused to be identified. Didi did not immediately respond to Reuters’ request for comment, and CAC has not yet commented on the announcement.
“Not long after the listing, US investors had tried to sue DiDi for failing to disclose their ongoing talks with the Chinese authorities. This is unlikely to be taken better,” said William Mileham, a stock analyst at Mirabaud. to be double-listed, but may well be delisted from the US before it starts trading on the HK stock exchange. “
Listing in Hong Kong can, however, prove to be complicated, especially in a tight three-month time frame, given Didi’s history of compliance issues and the scrutiny it has faced over unlicensed vehicles and part-time drivers.
The Hong Kong Stock Exchange does not comment on individual companies, a spokesman said. Shares on the stock exchange, however, rose by 4% on the prospect of a Didi listing.
Didi made 25 million trips a day in China in the first quarter, according to the IPO prospect. It debuted in New York on June 30 at $ 14 per American Depositary Share, but those shares had fallen 44% by the end of Thursday, valuing it at $ 37.6 billion.
The main shareholders are SoftBanks Vision Fund, with an ownership interest of 21.5%, and Uber Technologies Inc, with 12.8%, according to a submission in June from Didi.
Sources have also told Reuters that Didi is preparing to relaunch its apps in China by the end of the year pending Beijing’s cyber security investigation of the company to be completed by then.