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China tech

Didi shares crash nearly 20%, erasing $14bn in value

US IPO peers Kanzhun and Full Truck Alliance also skid on China crackdown

Shares in ride-hailing company Didi Global are under pressure after curbs announced by Chinese regulators.   © Reuters

HONG KONG -- Shares in Didi Global fell nearly 20% Tuesday as the U.S. stock market priced in the impact of the ride-hailing company's head-on collision with Chinese regulators.

The New York-listed stock opened at $11.78, well below last week's IPO price of $14, later narrowing its losses to close at $12.49. Its market cap sunk to around $60 billion, down from more than $74 billion on Friday.

The plunge came as U.S. markets reopened after the July 4 holiday, giving investors a chance to trade on the latest regulatory news out of Beijing.

On Sunday, the Cyberspace Administration of China (CAC) said it had ordered smartphone app stores to stop offering Didi's app -- the Chinese ride-hailing market leader -- after concluding the company had illegally handled users' personal data.

Other U.S.-traded Chinese stocks also wilted under authorities' closer scrutiny.

Kanzhun, operator of online recruitment app Boss Zhipin, and logistics company Full Truck Alliance -- which both listed last month in the U.S. -- also closed sharply lower Tuesday after the CAC cited both companies Monday, ordering them, too, to halt new user registrations. Kanzhun fell nearly 16%, while Full Truck Alliance skidded more than 6%.

The crackdown on companies that recently listed in the U.S. comes amid a geopolitical struggle between Beijing and Washington centered in part on technology. The investigation by the CAC will hurt the revenues and profits of the three companies, which are highly dependent on the Chinese market.

"For investors, it is clearly a warning sign as no Chinese company seems to be safe from China's regulatory scrutiny," said Zennon Kapron, managing director of consultancy Kapronasia in Singapore. "This was a risk that may have been easily discounted in the past, but no more today."

It also could derail the rush by Chinese companies to list in the U.S., although LinkDoc Technology, a medical data company backed by Alibaba Health Information Technology, appears on track to raise up to $210 million in an IPO set to price on Thursday. The offering has generated "investor interest," said a person involved with the transaction.

Thirty-four Chinese companies raised $12.4 billion in New York floats in the first half of 2021, data from research provider Dealogic shows, compared with 18 listings that raised $2.8 billion in the same period last year.

Share price "performance does matter," said a Hong Kong-based banker who works on IPOs. "How the shares open will have a bearing on the foreseeable pipeline. Common sense will probably dictate that in an environment where U.S.-listed Chinese companies are being targeted, you will start to see the IPO flow switch to Hong Kong."

The CAC's investigations continue a monthslong Chinese regulatory crackdown on technology companies. Authorities have probed antitrust breaches, data security and privacy issues in seeking to limit the growing clout of technology businesses and their billionaire founders.

Prominent in the crackdown has been Alibaba Group Holding and its financial affiliate Ant Group. Ant was prevented from carrying out what was expected to be the world's largest IPO last November when regulators tightened controls over its lending business. Meanwhile, Alibaba was hit with a record fine of 18.2 billion yuan ($2.75 billion) in April for anti-competitive practices.

More than 30 other Chinese companies have faced tighter regulator scrutiny, including food delivery company Meituan, Tencent and online retailer JD.com.

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