CRACKING LOSS
Didi Global fell $22 billion in market cap after a new Chinese regulation.
Didi Global Inc plunged in pre-market trading yesterday after a Chinese regulator ordered the removal of the company’s platform from app stores, days after a $4.4 billion initial public offering in the United States.
Shares of the China-based tech firm fell as much as 30% to $10.90, wiping out about $22 billion of market value and taking the stock below the $14 IPO price. They traded at $12.57 as of 6:55 a.m. in New York.
The Cyberspace Administration of China barred new users from Didi’s app, citing security risks and tightening its grip on sensitive online data.
Didi, whose American Depository Receipts only traded in New York since June 30, said the move might have an “adverse impact” on its revenue in China.
A Chinese crackdown on the nation’s big tech firms has knocked about $42 billion off of firms listed on the Nasdaq’s so-called Golden Dragon China Index, which tracks Chinese ADRs, since the government derailed the planned IPO of giant Ant Group Co in November.
Further moves included a record $2.8 billion fine on Alibaba Group Holding Ltd after an antitrust probe found it had abused its market dominance, sparking concern about the future of the sector.
“The Chinese government’s tactics appear to have the twin purposes of keeping its corporate leaders in check while also making sure the investor pain lands primarily in the US more so than China,” said Michael O’Rourke, chief market strategist at JonesTrading.
While Didi’s half-billion existing users will still be able to order rides for now, China’s cybersecurity crackdown adds to the uncertainty surrounding all the nation’s internet companies.
Tencent Holdings Ltd, which has a stake in Didi, is down 2.7% so far this week, after sliding 3.6% on Monday and partially trimming losses yesterday.
The onslaught of government announcements began on Friday after markets in Asia closed.
Chinese regulators asked Didi as early as three months ago to delay its landmark US IPO because of national security concerns involving its huge trove of data, according to people familiar with the matter.
In a statement released yesterday, China’s State Council said it would improve regulations and laws regarding data security, cross-border data flow and management of confidential information, in addition to increasing supervision and revising rules for overseas listings of Chinese companies.
Uber Technologies Inc, the second-biggest Didi holder, fell 1.4% in pre-market. The US stock market was closed on Monday for a holiday.
Full Truck Alliance Co and Kanzhun Ltd, both of which recently went public in the US, plummeted 16% and 9.7%, respectively, after China expanded its probe on the technology industry to include the firms.
Beijing ordered both to halt new user registrations, in addition to Didi.
The number of companies based in China filing for New York IPOs has climbed for a third straight quarter despite weakness in other US-listed stocks that conduct most of their business in China and amid the broad antitrust probe.