Reaction to Didi Global’s plans to delist from New York
(Reuters) -Following are reactions to ride-hailing giant Didi Global’s decision to delist from the New York stock exchange and pursue a listing in Hong Kong, succumbing to pressure from Chinese regulators concerned about data security.
Didi ran afoul of Chinese authorities by pushing ahead with its $4.4 billion U.S. IPO in July despite being asked to put it on hold while a review of its data practices was conducted.
SHIFARA SAMSUDEEN, LIGHTSTREAM RESEARCH ANALYST, WHO PUBLISHES ON RESEARCH PLATFORM SMARTKARMA:
“As we expected, Didi will first delist its shares from the NYSE and start filing for listing on HKEX. The company is already facing class action lawsuit in the US, and we think Didi will buy back its shares at the same IPO price of US$14 per share. However, it may not be able to relist its shares in HK at the same price (rather at a lower price) given there will be stringent control by the state over its use of user’s personal data (which will place it at a disadvantage) and location related issues such as liquidity, etc.
“Beijing is also sending a warning to the entire internet sector in China to be ready to face more regulations and is likely to keep foreign investors away from Chinese tech stocks for some time.”
ZHAN KAI, LAWYER AT EAST & CONCORD PARTNERS, SHANGHAI:
“Technically speaking, Didi’s U.S listing was not compliant with Chinese data security regulations.
“From a political perspective, China and the U.S. have so far failed to reach an agreement on supervising U.S.-listed firms. Apparently, the Chinese government hopes companies can choose Hong Kong as listing venue.”
“Chinese ADRs face increasing regulatory challenges from both U.S. and Chinese authorities. For most companies it will be like walking on eggshells trying to please both sides. Delisting will only make things simpler.”
NAN LI, ASSOCIATE PROFESSOR, FINANCE AT SHANGHAI JIAOTONG UNIVERSITY, SHANGHAI:
“Well, again no surprise to me. This is the only way that Didi can survive, and this is maybe a good thing for the investors in the U.S. market. There are other issues related to Didi in addition to the data security. Didi also embedded financial services on their platform, they withheld the payment to the drivers, charge high fees for drivers, make loans with high interest rates etc. And the inherent problems of the share-riding due to the fact there is no appropriate regulation of the bad behavior of the drivers.
“I don’t think Didi qualifies to be listed anywhere before it separates the data platform services with financial services, and sets up an effective protocols to manage and ensure the drives’ responsibility and benefits.”
JUSTIN TANG, HEAD OF ASIAN RESEARCH AT UNITED FIRST PARTNERS, SINGAPORE:
“The listing of Didi was largely expected given the crackdown post its IPO. It will now set a precedent for other U.S. listed companies, especially those with data concerns.
“The crackdown started with Ant’s botched IPO. The Chinese government has already shown that it will go beyond what the market has expected. It will be a while before sentiments thaw in relation to Chinese names.”
“Didi’s plan to delist in the United States and the listing of Hong Kong stocks I believe will have an obvious impact on location decisions for large technology stocks’ future listings. At the same time, this event makes the market believe that the current industry supervision of technology stocks in the mainland will continue, and the decline in the stock prices of technology stocks listed in Hong Kong today also reflects this factor.
“On the other hand, Didi, the company itself, also has its own unique factors. Because Didi’s business has more data related to customer information, which is leading the regulatory authorities to pay it special attention.”
MING LU, AEQUITAS RESEARCH ANALYST, SHANGHAI:
“I think this change does not bring anything positive for Didi’s investors. The authorities have not announced a final punishment on Didi and the investigation is still going on after more than 100 days. So far, the risk for Didi and its shareholders is still unlimited.”
KYLE RODDA, IG ANALYST, MELBOURNE:
“In the short- to medium-term, this means volatility for pockets of the market that are really exposed to global trade and U.S.-China geopolitics specifically, and you might start to see some pressure on Hong Kong stocks, which have tended to look to raise capital in the United States but base themselves in China and draw most of their profits from the Chinese economy.
“Longer term this is more significant, because this is going to be one of those frogs in a beaker scenarios where very, very slowly there’s going to be a decoupling between the U.S. and China in terms of their economic relationship, as well as their enmeshment with one another in the global financial system.”
TOM NUNLIST, SENIOR ANALYST AT CONSULTANCY TRIVIUM CHINA, BEIJING:
“My two main thoughts at this point are: If confirmed that CAC really is the main actor behind the push, then big flex for the regulator. Would be a further indication of it’s rising power and influence.
“The apparent issue is data security, but we still don’t have great insight into what the specific concern is. This is the outstanding question.”
(Reporting by Kevin Buckland in Tokyo, Alun John and Scott Murdoch in Hong Kong, Anshuman Daga in Singapore, Josh Horwitz in Shanghai; editing by Richard Pullin)