Technological crackdown in China leads to sale of Didi Global and affiliated companies

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HONG KONG / LONDON, July 6 (Reuters) – Shares of Didi Global Inc (DIDI.N) fell as much as 25% at the start of US trading on Tuesday in the first session since Chinese regulators ordered the withdrawal of the company’s app a few days after its price of $ 4.4. billion listed on the New York Stock Exchange.

The rideshare giant’s app was removed from mobile app stores in China on Sunday by the Cyberspace Administration of China (CAC), which said it was investigating Didi’s handling of customer data.

The ACC also announced on Monday cybersecurity investigations into other Chinese companies whose parents are listed in the United States, and the shares of those parents have also declined. Read more

Full Truck Alliance (YMM.N) fell by around 20% and Kanzhun Ltd (BZ.O) by around 8%.

The US market was closed Monday for the July 4th holiday.

Didi Global shares last traded at around $ 12, well below their first price of $ 16.65 on June 30, a drop of around $ 19 billion in market capitalization.

The Wall Street Journal reported on Tuesday, citing sources, that the company had been warned by regulators to delay the initial public offering (IPO) and to review the security of its network. Read more

“With some news sources saying that Didi knew months in advance that a crackdown was coming, some people will also start to have doubts about the governance of the company,” said Sumeet Singh, research director. Aequitas which publishes on Smartkarma. “If the crackdown was indeed planned months in advance, that would imply that it is not going to go away anytime soon.”

Didi said on Monday that banning the app would hurt its revenue in China, even if it remains available to existing users. He also told Reuters he was unaware of the investigation before the IPO. Read more

“The ban on Didi’s app will hurt the growth of its users and, at the same time, existing users of Didi’s app will also have some level of reservations about using the Didi app. company for fear of compromising their personal data, ”said Shifara Samsudeen, an analyst for LightStream Research who also writes on Smartkarma. “So it is obvious that Didi’s top line will be affected.”

Didi’s shares were sold for $ 14 each in the IPO, which was the highest listing of a Chinese company in the United States since Alibaba raised $ 25 billion in 2014. The company had was valued up to $ 75 billion on Friday.

The CAC said it ordered app stores to stop offering Didi’s app after finding that the company illegally collected users’ personal data.

“Some investors may have been reassured by the fact that the continuation of the listing was under the blessing of the authorities, when we now know that was clearly not the case,” said Dave Wang, portfolio manager at Nuvest Capital in Singapore. Read more

Nuvest did not participate in the IPO of Didi.

Reporting by Scott Murdoch in Hong Kong, Thyagaraju Adinarayan in London and Tom Westbrook in Singapore; Additional reporting by Divya Chowdhury in Mumbai and Caroline Valetkevitch in New York; Editing by Sumeet Chatterjee, Jason Neely and Kevin Liffey

Our Standards: Thomson Reuters Trust Principles.

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