Didi Global, the Chinese ride-hailing behemoth, announced its intentions to withdraw from the New York Stock Exchange and pursue a Hong Kong listing, just five months after its debut. This marks a remarkable turnaround in the strategy of the company which has arguably bowed down to pressures from Chinese regulators who were enraged by the company launching its IPO in the United States.
Investors reacted quickly, with the company's stock dropping 22.17 per cent and losing $8.4 billion in market value. Didi shares have dropped around 57 per cent since their June 30 IPO price of $6.07.
"Following careful research, the company will immediately start delisting on the New York stock exchange and start preparations for listing in Hong Kong," Didi said on its Twitter-like Weibo account.
Didi did not provide any details, but said in a second statement that it will hold a shareholder vote at a later date and assured that its New York-listed stock would be convertible into "freely tradable shares" on an internationally recognised market.
The decision, according to market experts, adds to the uncertainty for investors in Chinese businesses that have their stocks listed in the United States. Alibaba, Baidu, and other Chinese companies with US stock exchange listings declined in value on Friday since the decision of Didi.
"If you are a money manager and don’t understand what the rules are, it's easier to just sell and move your money where you better understand the rules of the game,” said Michael Antonelli, market strategist at Baird.
According to media reports from last month, Chinese officials urged Didi's senior executives to come up with a strategy to delist from the New York Stock Exchange owing to data security concerns.
According to two individuals familiar with the situation, Didi's board met on Thursday and authorised the US delisting and HK listing plans.
Despite being urged to put its $4.4 billion initial public offering on hold while Chinese regulators investigated its data practises, Didi had gone through with it in June this year.
Back then, the powerful Cyberspace Administration of China (CAC) had promptly ordered the removal of 25 of Didi's mobile applications from app stores and forced the business to cease registering new customers, claiming national security and public interest as justifications.
The app s of Didi provide users a range of service including delivery and banking services in addition to ride-hailing and these are still being investigated by Chinese authorities.
Didi may need to acquire shares at the $14 IPO price to avoid legal difficulties, or at the very least pay more than the current share price, according to Redex Research analyst Kirk Boodry, who posts on Smartkarma.
However, it was unclear what the delisting would signify for investors.
"There may also be some hope that by doing this, Didi management will improve its regulatory relations, but I am less confident on that," Boodry added.
The disruption of Didi's New York IPO - which is expected to be a tough and nasty process - demonstrates Chinese regulators' enormous power and their brazen attitude to using it.
Following him slamming China's regulatory system, Chinese billionaire Jack Ma drew afoul of Chinese authorities, resulting in the spectacular scuffling of Ant Group's mega-IPO last year.
Didi's action is likely to dissuade Chinese companies from listing in the United States, prompting others to reassess their status as publicly listed corporations in the United States.
"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," said Wang Qi, chief executive of fund manager MegaTrust Investment (HK).
(Source:www.economictimes.com)
Investors reacted quickly, with the company's stock dropping 22.17 per cent and losing $8.4 billion in market value. Didi shares have dropped around 57 per cent since their June 30 IPO price of $6.07.
"Following careful research, the company will immediately start delisting on the New York stock exchange and start preparations for listing in Hong Kong," Didi said on its Twitter-like Weibo account.
Didi did not provide any details, but said in a second statement that it will hold a shareholder vote at a later date and assured that its New York-listed stock would be convertible into "freely tradable shares" on an internationally recognised market.
The decision, according to market experts, adds to the uncertainty for investors in Chinese businesses that have their stocks listed in the United States. Alibaba, Baidu, and other Chinese companies with US stock exchange listings declined in value on Friday since the decision of Didi.
"If you are a money manager and don’t understand what the rules are, it's easier to just sell and move your money where you better understand the rules of the game,” said Michael Antonelli, market strategist at Baird.
According to media reports from last month, Chinese officials urged Didi's senior executives to come up with a strategy to delist from the New York Stock Exchange owing to data security concerns.
According to two individuals familiar with the situation, Didi's board met on Thursday and authorised the US delisting and HK listing plans.
Despite being urged to put its $4.4 billion initial public offering on hold while Chinese regulators investigated its data practises, Didi had gone through with it in June this year.
Back then, the powerful Cyberspace Administration of China (CAC) had promptly ordered the removal of 25 of Didi's mobile applications from app stores and forced the business to cease registering new customers, claiming national security and public interest as justifications.
The app s of Didi provide users a range of service including delivery and banking services in addition to ride-hailing and these are still being investigated by Chinese authorities.
Didi may need to acquire shares at the $14 IPO price to avoid legal difficulties, or at the very least pay more than the current share price, according to Redex Research analyst Kirk Boodry, who posts on Smartkarma.
However, it was unclear what the delisting would signify for investors.
"There may also be some hope that by doing this, Didi management will improve its regulatory relations, but I am less confident on that," Boodry added.
The disruption of Didi's New York IPO - which is expected to be a tough and nasty process - demonstrates Chinese regulators' enormous power and their brazen attitude to using it.
Following him slamming China's regulatory system, Chinese billionaire Jack Ma drew afoul of Chinese authorities, resulting in the spectacular scuffling of Ant Group's mega-IPO last year.
Didi's action is likely to dissuade Chinese companies from listing in the United States, prompting others to reassess their status as publicly listed corporations in the United States.
"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," said Wang Qi, chief executive of fund manager MegaTrust Investment (HK).
(Source:www.economictimes.com)
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