Didi Global may have insured its existence after receiving shareholder approval for a delisting from the New York Stock Exchange, but the Chinese ride-hailing company faces regulatory scrutiny and the impact of COVID-19.
As part of the investigation, Didi’s mobile apps have been removed from app stores in China, and new user registrations have continued to be suspended. The company reported a 13% drop in revenue in the fourth quarter last month compared to a doubling in the first quarter of 2021 before the survey.
Didi’s decision to leave the United States less than a year after launch is seen as an attempt to satisfy regulators who are furious at the company’s decision to continue with a $ 4.4 billion IPO, despite being asked to put it on hold while Chinese officials investigated its computer practices.
Didi is unlikely to see a resurgence in fortunes when soon the cyber security review, led by the Internet watchdog Cyberspace Administration of China (CAC), has not yet been completed and any punishment to be imposed has not yet been decided, sources said with knowledge. of the case.
“Didi’s cyber security survey is simply not high on the agenda for key executives,” said one person. Delays in charting Didi’s future may leave some investors without an exit option on their shares, whose value has already shrunk. The Ridehailer is currently valued at around $ 7.2 billion compared to $ 80 billion around the time of listing.
The final sentence on Didi was to be signed by the central leadership, which is now busy struggling with more pressing issues such as a sharp economic downturn and coronavirus outbreaks across the country, they added.
Didi did not immediately respond to a request for comment. Neither did the CAC or the Prime Minister’s Information Office. Supported by SoftBank and Uber Technologies, Didi said earlier this month that if it were not delisted from the US stock market, it would not be able to complete Beijing’s cyber security review, which has negatively impacted its business.
About 96% of Didi’s shareholders on Monday approved delisting their U.S. depository shares from the New York Stock Exchange. It plans to file paperwork with the U.S. Securities and Exchange Commission on June 2 or later to delist. Didi, which also offers delivery and financial services, previously aimed to go public in Hong Kong in June.
It has put such plans on hold indefinitely after not getting the green light from Chinese regulators. The regulatory action against Didi last year was part of a broader and unprecedented repression by the authorities for, among other things, violating antitrust and data security rules, targeting some of China’s most well-known company names. In an astonishing turn just five months after his debut, Didi said in December that they would withdraw from the NYSE and pursue an IPO in Hong Kong. “The delisting marks a significant but still small step for Didi to survive,” said a person familiar with the company’s mindset. “It needs to cut off its presence in the US capital market as soon as possible to win the chance.”
Another headwind facing Didi’s revival of ride-hailing business is China’s strict zero-COVID rules, which have put several cities, including financial center Shanghai, under lockdown for several months and forced many others to apply mobility controls. China’s trip-hail market has been on a downward trend since mid-last year due to COVID-19 outbreaks and tighter licensing controls, with such orders falling by 30% and 37% year-on-year. years in March and April, respectively, according to Bernstein analysts. “Didi will need to spend more on marketing to increase demand when life is back to normal,” they wrote in a note last week.
- After being delisted from the United States, China’s Didi faces a difficult path to growth
- Check out all the latest news and articles from the latest Business news updates.