Didi shares plummet as traders react to China’s crackdown

Shares of ride-sharing giant Didi Chuxing tumbled as much as 25% in pre-market trading on Tuesday, less than a week after the Chinese app was listed on the New York Stock Exchange.

The company’s stock price fell to $ 12.06 at 4:46 am Tuesday in pre-market trading, down from $ 15.53 at the last market close.

The drop comes after China announced Friday night that new users from the country would not be able to download the app while it conducts a cybersecurity review of the company.

Traders, who were unable to buy or sell the shares on Monday because markets were closed, reacted to the news on Tuesday.

Didi was listed on the New York Stock Exchange last Wednesday with a market capitalization of around $ 68 billion. The company’s shares rose nearly 16% on Thursday and fell just over 5% on Friday.

The pre-trade drop in Didi’s share price comes after The Wall Street Journal on Monday, citing people familiar with the matter, reported that Chinese regulators advised Didi to postpone its listing in the US. review your network security several weeks before it goes public.

Didi did not immediately respond to a request for comment from CNBC.

Kendra Schaefer, a partner at Beijing-based strategic advisory consultancy Trivium China, told CNBC’s “Squawk Box Europe” on Tuesday that Didi “definitely should have considered withdrawing the IPO.

He added that companies like Didi have huge government relations departments that are in regular contact with regulators.

Regulators may not have given Didi “a clear directive,” he said, adding that “it is absolutely possible that Didi wasn’t really sure which way to go and in the face of pressure from investors, they decided to do it.”

China is beginning to crack down on its tech titans after years of relatively little regulation. After announcing their investigation on Didi, Chinese regulators also opened cybersecurity reviews on Boss Zhipin, which is listed in the United States, and subsidiaries of the Full Truck Alliance.

In June, Reuters reported that Chinese regulators were investigating Didi for antitrust violations. Beijing is also reportedly investigating the company’s pricing mechanism.

Didi warned in its IPO prospectus that it could be penalized by dissatisfied regulators.

“We cannot assure you that regulatory authorities will be satisfied with the results of our self-inspection or that we will not be subject to any sanction with respect to any violation of antitrust, anti-unfair competition, pricing, advertising, privacy protection, food safety. , product quality, taxes and other related laws and regulations. We expect these areas to receive more and continued attention and scrutiny from regulators and the general public in the future, “the company said in its prospectus.

Founded in 2012, Didi said it has 493 million annual active passengers and 41 million average daily transactions. It began expanding internationally in 2018 and the company now operates in 14 countries outside of China.

In addition to the traditional transport service, Didi invests heavily in making autonomous taxis a reality and operates various segments around mobility.

Additional reporting by Steve Kovach and Jessica Bursztynsky.

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