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 reversal as it bowed to Chinese regulators angered by its US IPO.
The company’s shares fell about 15% after swinging between gains and losses in pre-market trading, with investors initially betting the move would appease Beijing and serve as a catalyst for a revival of its business prospects in the country.
“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.
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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 last month that Chinese regulators pressed Didi’s senior executives to develop a plan to delist from the New York Stock Exchange over concerns over data security.
Didi’s board met on Thursday and approved plans for U.S. delisting and Hong Kong listing, two sources familiar with the matter said.
Didi launched a US $ 4.4 billion initial public offering in June, despite being asked to put it on hold while a review of its data practices was conducted.
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, whose apps, in addition to carpooling, offer products such as delivery and financial services, remains under investigation.
Redex Research analyst Kirk Boodry, who posts on Smartkarma, said Didi may have to buy shares at the IPO price of $ 14 to avoid legal issues and that he will at the very least pay more than the current trading price of the shares.
However, there was still uncertainty over what the delisting meant for investors. “There may also be some hope that by doing this Didi’s management will improve its regulatory relationship, but I’m less confident about that,” Boodry added.
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.
Did’s decision will likely further discourage Chinese companies from listing in the United States and may prompt some of them to reconsider their status as publicly traded American 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 listing in Hong Kong within the next three months and withdraw from New York by June 2022, one of the sources said.
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.
“Shortly after the IPO, US investors attempted to sue DiDi for failing to disclose its ongoing discussions with Chinese officials. It is unlikely to be better taken,” said William Mileham, analyst actions at Mirabaud. “It looks like DiDi is not waiting to be double listed, but may well be delisted from the United States before it starts trading on the Hong Kong Stock Exchange.”
HONG KONG HEDGES
Listing in Hong Kong, however, could prove to be complicated, especially within a tight three-month deadline, given Didi’s history of compliance issues and the scrutiny he has faced on vehicles without. licensed and 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 limousine services, vehicle registration and driver’s 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 (…) puts in place effective protocols to manage and secure driver liability and benefits,” said Nan Li, associate professor of finance at Shanghai Jiao Tong University.
The Hong Kong Stock Exchange (0388.HK) does not comment on individual companies, a spokesperson said. Stocks, however, jumped 4% on the prospect of a Didi listing.
Didi delivered 25 million groceries a day to China in the first quarter, according to its IPO prospectus. It debuted in New York City on June 30 at $ 14 per US custodian share, but those shares had fallen 44% by Thursday’s close, valuing it at $ 37.6 billion.
Its largest shareholders are SoftBank’s Vision Fund, with a 21.5% stake, and Uber Technologies Inc (UBER.N), with 12.8%, according to a June filing from Didi.
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 investigation into the company’s cybersecurity would be completed by then.
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Reporting by Julie Zhu, Kane Wu, Cheng Leng and Zoey Zhang; Additional reporting by Brenda Goh, Josh Horwitz, Alun John, Sayantani Ghosh, Scott Murdoch and Marc Jones; Editing by Sumeet Chatterjee, Edwina Gibbs, Jan Harvey and Dan Grebler
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