Chinese ride-hailing group Didi has notified the New York Stock Exchange that it will go private in the United States after shareholders overwhelmingly supported a plan to bring the company’s services back to Chinese app stores.
The company said more than 95% of shares launched in Monday’s vote approved its delisting plan, nearly a year after Didi launched a $4.4 billion initial public offering in the US. US, despite signs from Chinese regulators warning against the move.
The failed IPO, which took place on the eve of the Communist Party’s centenary, plunged the company into a crisis that lasted for months. Didi’s shares have dropped 90% since its IPO, wiping out $60 billion from its market cap.
Beijing’s cybersecurity investigation, which began just days after the IPO, left Didi unable to hire new users, slashing revenues and magnifying losses, while layoffs sank confidence in the company.
Didi founders Cheng Wei and Jean Liu, who have withdrawn from the spotlight, hope that leaving the US market will spur Beijing to end the regulatory investigation. Didi said the executives, who together own about 10% of the company’s shares, will vote in favor of delisting.
The company’s board of directors, which includes representatives from major shareholders including tech groups Alibaba, Tencent and Apple, also supported the move. Didi said it will file paperwork with the SEC (US Securities and Exchange Commission) to begin the delisting process as early as June 2.
However, Didi said this month that it “remains uncertain” whether all of the company’s proposed rectification measures, including delisting, will calm Beijing and allow it to “resume normal operations”.
The company had already hoped to list its shares in Hong Kong before going public in the US, but the ongoing regulatory investigation has brushed aside those plans.
Cherry Leung, an analyst at Bernstein, said Didi is in limbo as long as Beijing’s regulatory crackdown persists. “Didi is currently in a deadlock situation until the cybersecurity investigation in China ends,” she said.
“Regulators on the Chinese side want Didi to limit disclosures to the SEC,” she said, noting that the move to over-the-counter trading would allow the company to stop filing financial reports with the US regulator and place its audit documents outside the scope of the US Publicly Traded Accounting Oversight Board. Beijing does not allow the council to carry out inspections of audits done in China.
Leung warned that U.S. investor class actions and compliance issues with Didi’s personal transportation business would be additional obstacles to a Hong Kong listing once the cybersecurity investigation is resolved.
The delisting comes despite repeated promises from top economic officials, including Vice Premier Liu He, that China will end the regulatory onslaught against its big tech companies.
But the investigation into Didi was led by the Cyberspace Administration of China, the Communist Party body that reports to Chinese President Xi Jinping.
The regulator has been at the forefront of China’s technology crackdown, and over the past two years it has expanded its regulatory mandate from online advertising and censorship to data control and network security.
Collaborated Nian Liu
Translated by Luiz Roberto M. Gonçalves
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