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China weighs ‘unprecedented’ penalties for Didi after US IPO

China weighs 'unprecedented' penalties for Didi after US IPO

China is reportedly weighing “unprecedented” penalties for Didi after the ride-sharing giant went public in the US in June despite a crackdown from its home country’s cybersecurity regulator.

China’s government may forcibly introduce a state-owned investor to the company’s board or force the Didi — popularly known as the “Chinese Uber” — to delist or withdraw the $4.4 billion in shares it listed on the New York Stock Exchange last month, Bloomberg reported Thursday, citing people familiar with the matter.

More conventional punishments that regulators are considering reportedly include imposing a fine or forcing the company to suspend parts of its operations.

Didi — which bought out Uber’s unprofitable China operation in 2016 — did not immediately reply to a request for comment on the report.

The company’s stock was down more than 8 percent on the news Thursday morning, trading at $10.56, according to MarketWatch data.

Prior to Thursday’s battering, Didi shares had already fallen 40 percent from their peak of more than $18 earlier this month.

A taxi with a sticker of Chinese ride-sharing company Didi stops at a traffic light in front of Italian luxury accessory brand store, Bulgari seen in Tokyo.
The Chinese government may forcibly introduce a state-owned investor to Didi’s board, Bloomberg reported.
SOPA Images/LightRocket via Gett

Just two days after Didi went public in the US at a valuation of $80 billion, China’s cybersecurity regulator revealed it was investigating the company over privacy concerns. Soon after, authorities said they would prevent the company from taking on new customers and removed the company’s apps from app stores.

Prior to Didi going public in the US, Chinese regulators expressed concerns about the company’s data security practices, according to Bloomberg. The regulators allegedly urged Didi to shift the IPO to Hong Kong or mainland China but did not explicitly forbid the company from going public in the US.

Didi is not the only tech company to face the wrath of Chinese regulators.

A graph showing that Didi's shares have already fallen more than 40 percent from their peak.
Didi shares have already fallen more than 40 percent from their peak.
Google Markets

Late last year, China suspended a planned $37 billion IPO by e-commerce giant Ant Group, shocking investors.

Shortly afterward, Chinese regulators said they were conducting an antitrust probe of the company and Ant Group founder Jack Ma went into hiding for months. In July, regulators fined Ant Group affiliate company Alibaba $2.8 billion for suppressing competition — the country’s biggest antitrust penalty to date.

Yet whatever penalty China imposes on Didi is expected to be “harsher” than the Alibaba fine, Bloomberg reported.

About the author

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Julia Mangels

Julia has handled various businesses throughout her career and has a deep domain knowledge. She founded Stock Market Pioneer in an attempt to bring the latest news to its readers. She is glued to the stock market most of the times and just loves being in touch with the developments in the business world.

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