Chinese giant Didi said it would remove the stock from the New York Stock Exchange, a stunning reversal for a tech group whose hasty overseas listing in June sparked a backlash from Beijing.
In Friday’s announcement on the Chinese microblog Weibo, the company said it had begun work on a withdrawal from the US exchange, where it is known as Didi Global, and began preparations for a re-listing in Hong Kong.
The move is the clearest sign that two decades of Chinese tech companies that have made huge strides in the US markets are drawing to a close, and this sea change threatens to affect the $ 2 trillion Chinese stocks traded in the United States.
Over the past year, the Chinese Communist Party has launched a multi-stakeholder campaign to curb its internet giants, focusing on groups it believes are responsible for data insecurity, dodgy business practices and unfair competition.
Didi, the Chinese answer to Uber, hit the bull’s-eye with the crackdown. It accounts for about 90% of the Chinese passenger call services market, holds a huge amount of data on Chinese citizens and is criticized for its policy of paying drivers.
Chinese officials have expressed concern that efforts by US regulators to strengthen due diligence on US-registered Chinese companies may require Chinese groups to transfer sensitive information. Beijing’s decision was to encourage companies to list in mainland China or Hong Kong markets, where it retains regulatory control.
Didi’s announcement is a major concession in the company’s desire to mend its relationship with the country’s cybersecurity regulator. The China Cyberspace Administration (CAC) announced an investigation into the alleged “illegal collection and use of user personal information” just days after Didi conducted an initial public offering in New York that raised $ 4.4 billion. By the end of the first day of trading, Didi was valued at $ 68 billion, making it the largest share sale in the United States since Chinese online group Alibaba listed in 2014.
The CAC investigation has yet to be announced, but uncertainty over Didi’s business and its relationship with regulators has led to a sharp drop in its share price. Its shares have hovered around $ 8 in recent weeks, sometimes approaching $ 7, which is half the value of its initial public offering. Regulators have banned Didi from registering new users and blocked many of its apps in stores.
Founded in 2012 by a former Alibaba employee, Didi has been seen for years as a local leader who has proven that upstart Chinese firms can take over Silicon Valley. Uber left the Chinese market in 2016, selling its operations to Didi. Like many Chinese internet startups at the time, the company thrived in a gray regulatory area, resisting attempts by government regulation.
Today, the company’s rapid fall underscores a sharp shift in government attitudes toward private enterprise, as the government, under the leadership of high-ranking Chinese leader Xi Jinping, tightens control over the once-free tech sector. Sectors from private tutoring to insurance and video games have been targeted by regulators.
“The Wild West period for internet companies and private companies in China is over because President Xi has made it very clear that he wants to see an economy in which government plays an important role,” said Henry Gao, a law professor. specializes in trade with China at the Singapore University of Management. “The space for private companies is shrinking.”
The massive crackdown that began almost a year ago has caused $ 1.5 trillion of Chinese stocks to be destroyed since February. Shares of Chinese tech companies traded in Hong Kong fell on Friday following news of Didi.
Didi ranks among several large companies under official scrutiny as authorities target internet giants whose power and control over large amounts of personal data are increasingly viewed as a threat.
As China’s ties with the United States and other Western countries have deteriorated, Chinese leaders have become increasingly concerned that this data will fall into unfriendly hands. According to the draft regulations released by the CAC in July, companies with data on more than 1 million users must pass a cyber security check before listing overseas.
“The Didi case was a turning point in China’s data sovereignty and the rewriting of listing rules in China,” said Angela Zhang, director of the Chinese Law Center at the University of Hong Kong, which specializes in regulation in China. “The significance of this case cannot be overestimated.”
Didi’s announcement came a day after the Securities and Exchange Commission announced new rules allowing US regulators to prohibit or exclude foreign companies from US exchanges if they fail to comply with disclosure requirements.
“China feels that they need to take certain measures to counter these kinds of threats,” Zhang said.
Lyricist Lee of the Washington Post from Seoul, South Korea contributed to this report.