DiDi shares to plummet as investors play catch-up following Chinese app ban

DiDi Global Inc (NYSE:DIDI) stock is to plunge ahead of Tuesday’s trading restart in New York after the China censured the group, which last week marked the largest Chinese float in the US since Alibaba’s in 2014. The Chinese government this weekend said that group, China’s dominant ride-hailing app, had committed serious violations related to the collection and use of personal data, and, ordered its apps be removed from app stores in the country. It followed the launch of a government review into the company just days after DiDi completed its New York IPO. In Tuesday’s premarket deals, DiDi stock is down US$3.31 or 21% changing hands at US$15.53 each. On June 30, the DiDi IPO was priced at US$14 per ADS (American Depository Shares) as the Chinese group raised US$4.4bn from US investors. The IPO was said to be oversubscribed by ‘multiple times’ and the Chinese group’s American bankers scaled back the offer. READ: Didi issues warning as app is pulled from stores DiDi was valued at US$68bn by the stock market float and, previously, there had been suggestions that the IPO could’ve been pitched at a US$100bn valuation. Prior to the float, there had been some reports that an antitrust probe could be among the risks associated with the offering and those concerns were described by the company as "unsubstantiated speculation from unnamed sources". Neil Wilson, an analyst and market commentator in London, in a note said that the SEC, the US financial regulator, will not be impressed with what has happened. “It’s a complicated picture – there are reports Didi knew of a regulatory crackdown and was even asked to delay its IPO,” Wilson said. “DiDi says it had no knowledge of the actions by the cybersecurity regulator. The stock only started trading on Wednesday and the ban announced Sunday. “China is cracking down on big tech, but the decision to remove the app from domestic platforms appears to be timed for maximum impact and embarrassment. “China’s Communist Party is bristling at the number of Chinese companies listing in the US this year, but there is a genuine concern at the heart of this - regulators are not impressed at the way Didi and other Chinese tech companies handle data.” “The SEC will not be impressed either way.” App banned Chinese authorities warned the ride-hailing firm on Friday they were investigating the business and on Sunday banned it from app stores. Didi, which operates predominately in China where it organises 20mln journeys daily, has been accused of illegally using personal data gathered from customers. China’s Cyberspace Administration (CAC) said: "After checks and verification, the Didi Chuxing app was found to be in serious violation of regulations in its collection and use of personal information." The ban means Didi will not be allowed to sign up new users, though existing customers can carry on using the app as normal. In a statement, Didi said: "The company will strive to rectify any problems, improve its risk prevention awareness and technological capabilities, protect users' privacy and data security, and continue to provide secure and convenient services to its users.”