Exclusive | Didi bars employees from selling shares until Hong Kong listing, internal memo shows

The ride-hailing giant is telling current employees and those who left in within 180 days to hold onto their stock until after the new listing
Didi Global is in the process of delisting in New York after a six-month cybersecurity investigation in China that remains ongoing

Didi Chuxing

Coco Fengin Beijing

Published: 5:30pm, 28 Dec, 2021

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Employees at China’s ride-hailing giant Didi Global were told that they cannot exert their stock option rights until the day the company completes a listing in Hong Kong, according to an internal memo seen by the South China Morning Post.

The company announced plans this month to delist from the New York Stock Exchange, and it is now barring employees from cashing out until new shares are available in Hong Kong, according to the company memo. Before the new rule, employees would have been able to sell their stock starting in January.

The rule applies to all current employees and those who have left within the last 180 days. One reason, according to the memo, is because the company must provide information to the US Securities and Exchange Commission about its stock incentive plan. The memo also cited company rules regarding significant non-public information and the prevention of insider trading.

China paves way for new VIE IPOs overseas with new regulation

Didi did not immediately respond to a request for comment.

The suspension comes nearly six months after its blockbuster US$4.4 billion IPO in New York on June 30. Just days later, the Cyberspace Administration of China (CAC) announced a cybersecurity review of the firm. The probe has still not concluded, and Didi has provided no timeline for a Hong Kong listing.

To list in the Asian financial hub before delisting in the US, a process that can take months, Didi would likely pursue a dual-primary listing. Such a listing would be subject to regulatory scrutiny on par with US bourses, industry insiders previously told the Post. For a secondary listing in Hong Kong, a firm must be listed elsewhere for at least two years.

Having a Hong Kong listing ready while delisting in New York would allow investors in the US to convert their American depository receipts into Hong Kong shares. This would give them an option other than cashing out shares that currently trade at about 40 per cent of their IPO value of US$14. Shares closed at US$5.30 on Monday.

It would also help Didi establish a new listing at home before the US implements the Holding Foreign Companies Accountable Act, which will force foreign companies to delist from US exchanges if they fail to turn over audit results for three straight years, starting from 2020.

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Why China is tightening control over cybersecurity

Last week, the China Securities Regulatory Commission published a draft regulation giving tacit approval to companies using the variable interest entity (VIE) structure, a popular method of launching overseas listings for Chinese companies such as Didi. However, they must still meet compliance rules in China.

The CAC, the internet regulator, drafted new rules in July requiring a security check of any platform handling the data of more than 1 million users if they seek an overseas listing. The rule was later clarified to also apply to Hong Kong listings.

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