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China cyberspace administration launches security probe into Didi

Move comes two days after Wall St. debut

Didi says it plans to conduct a comprehensive examination of cybersecurity risks.   © Reuters

BEIJING (Reuters) -- Didi Global's shares fell up to 10% in pre-market trade in New York on Friday after China's cyberspace administration said it had launched a new investigation into the ride-hailing giant to protect national security and the public interest.

The Cyberspace Administration of China (CAC) said Didi was not allowed to register new users during its investigation, which was announced just two days after Didi began trading on the New York Stock Exchange.

Didi said it planned to conduct a comprehensive examination of cybersecurity risks and would cooperate fully with the relevant government authority.

"Didi does seem to be attracting a lot of regulatory pressure. The near-term impact depends a lot on how long a review lasts but Didi has a large enough base that we aren't going to change our forecasts yet," Redex Research analyst Kirk Boodry, who publishes on Smartkarma, told Reuters.

"Over a longer time frame, regulatory scrutiny, whether its driven by pricing or platform security, opens the door for smaller rivals to take share," Boodry said.

Chinese internet regulators have tightened rules for the country's tech giants in recent years, asking companies to collect, store and handle key data properly.

"Markets will hate this. Regulators killed the Ant IPO and now they're pushing hard on Didi just as it has listed," Boodry said.

Didi, which raised $4.4 billion from its initial public offering (IPO), did not hold a celebration event for its market debut, an unusual move among Chinese companies.

The company is also facing an antitrust investigation, revealed by Reuters in June, looking at whether Didi used anti-competitive behaviours to drive out smaller rivals.

Didi said at the time that it would not comment on "unsubstantiated speculation from unnamed source(s)".

Didi's debut on Wednesday was the biggest U.S. listing by a Chinese company since Alibaba Group Holding Ltd in 2014.

Didi had aimed to raise up to $10 billion through its IPO to value the company at $100 billion. However, investors were critical of the valuation target during meetings ahead of the deal's launch which pushed its size down.

Didi, which is also backed by technology investment giants Alibaba, Tencent and Uber, was founded in 2012 by Cheng Wei as Didi Dache, a taxi-hailing app.

It merged with rival Kuaidi Dache to become Didi Kuaidi and was later renamed Didi Chuxing.

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