Didi Global to vote on US delisting next month, says no new listing plan before NYSE exit

Beijing-based firm says it will not apply for another flotation before completing its delisting from the New York Stock Exchange
The riding-hailing giant must cooperate further with China’s cybersecurity regulators and conduct rectifications

Didi Chuxing

Yaling Jiangin Shanghai

Published: 12:40pm, 17 Apr 2022

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Shareholders of Didi Global, the Chinese ride-hailing giant under investigation for cybersecurity breaches, are expected to vote to delist from the US at a special meeting on May 23, a move that shows Beijing’s tough regulatory crackdown is still casting a long shadow over the country’s tech sector.

The Beijing-based firm, which was put under investigation days after its US$4.4 billion initial public offering (IPO) on June 30 last year, said in a statement on Saturday that it would not apply for another listing on any other exchange before completing its delisting from the New York Stock Exchange. In a statement issued in December, Didi had said that it would delist from New York and pursue a listing in Hong Kong.

The planned delisting, uncertainties arising from its cybersecurity investigation and the lack of immediate prospects for a relisting, are set to deal a heavy blow to the company’s valuation – and could even undermine investor confidence in Chinese stocks.

The China Securities Regulatory Commission (CSRC), the country’s stock market watchdog, said in a statement issued immediately after Didi’s announcement that the ride-hailing firm’s delisting plan had nothing to do with other US-listed Chinese stocks, and was not related to “the ongoing audit cooperation between China and the US”, in an apparent move to control any spillover damage from Didi’s statement.

Didi is said to halt its Hong Kong listing plan on cybersecurity probe

According to the Didi statement, it must cooperate further with China’s cybersecurity regulators in the investigation and conduct “rectifications”.

Experts said Didi’s move demonstrates the seriousness the Chinese government attaches to data security and cybersecurity, even if it comes at a huge cost to the operations of business firms.

“This also confirms my observation that the tech crackdown will continue despite Liu He’s recent announcements,” said Henry Gao, an associate professor of law at Singapore Management University, referring to Chinese Vice-Premier Liu’s call last month for order and transparency in government dealings with Big Tech firms.

Although the CSRC has insisted that Didi’s delisting is a corporate decision based on market conditions, the company will likely have taken the tighter regulatory climate into consideration, according to Sandra Marco Colino, an associate professor at the Faculty of Law, Chinese University of Hong Kong.

“Chinese regulators have sent a strong message that companies should abide by [written and unwritten] rules when conducting their business activities. If they don’t, they may face severe and swift consequences,” Colino said.

Didi angered China’s cybersecurity authority by “forcing its way” into an IPO in the US without Beijing’s full consent, the Post reported earlier. As a result, government authorities, led by the powerful Cyberspace Administration of China, ordered app stores to remove 25 mobile apps operated by Didi and told the company to stop registering new users last summer on national security grounds.

Didi in talks for a second-quarter IPO in Hong Kong, sources say

A government task force, including delegates from China’s Ministry of Public Security and Ministry of State Security, entered Didi premises last July to carry out an investigation, but the task force has not published any findings or conclusions.

The firm reported total revenue of 40.8 billion yuan (US$6.4 billion) for the fourth quarter of 2021, a decline of 12.6 per cent when compared with the same period a year ago, Didi said in a separate statement.

Meanwhile, Tencent Holdings president Martin Lau Chi-ping has left Didi’s board of directors, according to another Didi statement on Saturday. He was replaced by Liang Fengxia, associate general counsel at Tencent.