Intimidated by Chinese regulators, Didi considers New York delisting and Hong Kong debut

HONG KONG, Dec.3 (Reuters) – Just five months after its debut, ridesharing giant Didi Global (DIDI.N) has announced plans to withdraw from the New York Stock Exchange and continue listing in Hong Kong – an astonishing about-face as it bowed to Chinese regulators angered by its initial public offering in the United States.

Its shares soared 15% in pre-market trading, with investors betting the move would appease Beijing and serve as a catalyst for a revival of its business prospects in the country.

Didi launched a US $ 4.4 billion initial public offering despite being asked to put it on hold while a review of the company’s data practices was conducted.

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The powerful Cyberspace Administration of China (CAC) then quickly ordered app stores to remove 25 of Didi’s mobile apps and demanded the company stop registering new users, citing national security and interest. public. Didi is still under investigation.

“After careful research, the company will immediately begin delisting from the New York Stock Exchange and begin preparations for listing in Hong Kong,” Didi said on his Twitter-like Weibo account on Friday.

Didi did not explain the reasons for his plan, but said in a separate statement he would hold a shareholder vote at an appropriate time and ensure that his New York-listed shares are convertible into “freely tradable shares.” on another internationally recognized stock exchange.

Sources told Reuters that Chinese regulators pressured Didi’s top executives to come up with a plan to delist from the New York Stock Exchange over concerns over data security.

The reversal of Didi’s listing in New York – likely to be a difficult and messy process – illustrates both the enormous influence Chinese regulators have and their bold approach to exerting it. Billionaire Jack Ma has also clashed with Chinese authorities after he blew up the country’s regulatory system, leading to the spectacular failure of a mega-IPO for Ant Group last year.

The move is likely to further discourage Chinese companies from listing in the United States and may prompt some of them to reconsider their status as publicly traded U.S. companies.

“Chinese ADRs face increasing regulatory challenges from US and Chinese authorities. For most businesses, it will be like walking on eggshells trying to please both parties. The delisting will only make things easier, ”said Wang Qi, CEO of fund manager MegaTrust Investment (HK).

Didi plans to complete a listing in Hong Kong soon and does not plan to be private, sources familiar with the matter told Reuters.

He aims to complete a dual primary enrollment in Hong Kong within the next three months, and under pressure from Beijing, delisting New York by June 2022, one of the sources said.

A sign for the Chinese rideshare service Didi can be seen at its headquarters in Beijing, China on July 5, 2021. REUTERS / Tingshu Wang

The sources were not authorized to speak to the media and refused to be identified. Didi did not immediately respond to requests for comment from Reuters, and ACC has yet to comment on his announcement.

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Signing up in Hong Kong could prove to be complicated, however, especially within a tight three-month deadline given Didi’s history of compliance issues and the scrutiny he has faced on unlicensed vehicles and vehicles. part-time drivers.

Only 20 to 30 percent of Didi’s core business in China is fully compliant with regulations requiring three permits for the provision of transportation services, vehicle registration and driving licenses, sources previously said.

Didi said in his IPO prospectus that he had secured carpool permits for cities that collectively made up the majority of his total trips. He did not answer further questions about the permits.

Those issues had been the main obstacle to the company’s Hong Kong IPO earlier and it remains to be seen whether the exchange will approve it now, sources familiar with the matter said on Friday.

“I don’t think Didi qualifies to be on the list before she… has effective protocols in place to manage and secure driver liability and benefits,” said Nan Li, associate professor of finance at the Shanghai Jiao Tong University.

The Hong Kong Stock Exchange (0388.HK) does not comment on individual companies, a spokesperson said. Stock market shares, however, jumped 4% on the prospect of a Didi listing.

Sources also told Reuters that Didi was preparing to relaunch its applications in China by the end of the year in anticipation that Beijing’s cybersecurity investigation into the company would be completed by then.

Didi made 25 million trips per day in China, according to first quarter data. It debuted in New York City on June 30 at $ 14 per US custodian share, but those shares have since slipped 44% through Thursday’s close, valuing it at $ 37.6 billion.

SoftBank’s Vision Fund owns 21.5% of Didi, followed by Uber Technologies Inc (UBER.N) with 12.8%, according to a June filing from Didi.

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Reporting by Julie Zhu, Kane Wu, Cheng Leng and Zoey Zhang; Additional reports by Brenda Goh, Josh Horwitz, Alun John and Sayantani Ghosh; Editing by Sumeet Chatterjee and Edwina Gibbs

Our standards: Thomson Reuters Trust Principles.

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