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China tech

China's Didi Global to delist from New York in favor of Hong Kong

Leading ride-hailer to make dramatic retreat after $4.4bn June IPO

Didi's shares have fallen more than 50% since its IPO, leaving it with a market capitalization of $37.62 billion.   © Reuters

HONG KONG -- Didi Global announced on Friday that it has begun the process of delisting its shares from the New York Stock Exchange and preparing for a Hong Kong listing in a dramatic retreat from its $4.4 billion U.S. initial public offering just six months earlier.

The decision was made after "careful consideration," the ride-hailing platform said in the Chinese version of its statement posted on the Weibo social network.

Didi said in the English version of its statement, posted to its own website, that U.S. shareholders would eventually be able to convert their holdings to "freely tradable shares of the company on another internationally recognized stock exchange." They would also get a chance to vote on the company's plan.

Didi's IPO on June 30 alarmed Chinese regulators who worried that it could give U.S. officials access to sensitive customer data. The authorities responded with a series of measures against the company, including banning it from signing up new customers and forcing it out of local app stores.

Its shares have fallen off steeply since the IPO, closing Thursday at $7.80 and leaving it with a market capitalization of $37.62 billion. It sold shares in June at $14 a piece. 

In Hong Kong, though, the Hang Seng Tech Index, which includes shares of many Chinese companies that listed first in New York and then came to Hong Kong, was down 1.5% on Friday afternoon.

Shares of SoftBank Group, meanwhile, dipped 0.7% after touching their lowest level since June 2020. SoftBank's Vision Fund has invested $12 billion in Didi, making it the Chinese company's biggest outside shareholder.

Didi has yet to announce any quarterly results since it went public. It reportedly chose not to do an lPO in Hong Kong originally out of concern that its failure to secure full licenses in some of the Chinese cities where it operates might raise flags during the stock exchange's listing review.

Benjamin Qiu, who handles Chinese technology financing deals as a partner with law firm Loeb & Loeb, noted that agreements binding various fund managers and other companies that invested in Didi before its IPO not to sell within 180 days of the listing will expire at the end of the year.

"In a couple of weeks, a lot of the venture capital and private equity investors would have a chance to cash out when Didi is still on the market in New York," he said.

Aside from SoftBank, other Didi shareholders include U.S. ride-hailing group Uber Technologies, Apple, Morgan Stanley, Singapore's Temasek Holdings, Tencent Holdings, Alibaba Group Holding and Hong Kong's Primavera Capital Group.

Didi's rivals have sought to chip away at its dominant market share amid its regulatory troubles.

In October, T3 Chuxing, a 2-year-old startup, raised 7.7 billion yuan ($1.21 billion) from investors led by state-backed conglomerate CITIC Group in the largest funding round for a Chinese ride-hailing platform since 2018.

Food delivery group Meituan has also relaunched its own ride-hailing service. Platforms including Alibaba-backed Gaode Map and Xiangdao Chuxing have aggressively distributed discount coupons to lure users.

China has stepped up controls on overseas IPOs since Didi's listing on the eve of celebrations of the Communist Party's 100th anniversary. A draft rule published later in July would require companies holding data on more than 1 million users to go through a cybersecurity review before seeking an overseas listing, due to the risk that data could be "affected, controlled and maliciously exploited by foreign governments."

In a subsequent update, the regulators clarified that those seeking an IPO in Hong Kong would need a cybersecurity review only if their data "will influence or may influence national security."

Further draft rules are expected soon on controlling overseas listings through a corporate structure known as a variable interest entity (VIE). The rules will be very "harsh," according to people familiar with the drafting process.

The pending rules on VIEs in turn could cause issues with Didi's plans to list in Hong Kong, Thomas Gatley, chief China corporate analyst at research company Gavekal, said at a client forum in Beijing on Friday. Regulatory approval, he said, "is not a foregone conclusion," which could force Didi to simply go private.

Meanwhile, U.S. officials have stepped up efforts to push Chinese companies off New York exchanges. On Thursday, the Securities and Exchange Commission published new rules that will allow it to demand extra disclosures by Chinese companies.

"Chinese companies that are now listed in the U.S., it is almost certain that they are going to be forced to leave," said Arthur Kroeber, head of research at Gavekal.

Additional reporting by Cissy Zhou, Wataru Suzuki and Kenji Kawase.

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