SUBSCRIBE

CATEGORIES

Didi shares slump 25% in pre-open trade on China crackdown

imageStock Markets9 minutes ago (Jul 06, 2021 05:41AM ET)

(C) Reuters. FILE PHOTO: The app logo of Chinese ride-hailing giant Didi is seen reflected on its navigation map displayed on a mobile phone in this illustration picture taken July 1, 2021. REUTERS/Florence Lo/Illustration/File Photo

HONG KONG/LONDON (Reuters) -Didi Global Inc shares slumped 25% in U.S. pre-market trade on Tuesday, ahead of its first session since Chinese regulators ordered that the company’s app be taken down days after its $4.4 billion listing on the New York Stock Exchange.

The ride-hailing giant’s app was ordered to be removed from mobile app stores in China on Sunday by the Cyberspace Administration of China (CAC) which followed an official investigation into the company’s handling of customer data.

The U.S. market was closed on Monday for the July 4 holiday.

In pre-market trade on Tuesday, Didi shares fell as much as 25% to $11.59, well below its debut price of $16.65 on June 30. At that pre-market level, Didi is set to shed nearly $19 billion in market capitalisation.

“In terms of fundamental impact that (share price fall) is a bit harsh, in our view,” said Sumeet Singh, Aequitas Research director who publishes on Smartkarma, told Reuters.

“But with some news sources saying that Didi knew months in advance that a crackdown was coming, some people will start to have their doubts on governance of the company as well.”

The Wall Street Journal reported on Tuesday, citing sources, that the company was warned by regulators to delay the initial public offering (IPO) and examine its network security.

“And if the crackdown was indeed planned months in advance that would imply that it’s not going away soon, which might explain the large share price correction,” Singh added.

Didi said on Monday the app’s ban would have an adverse impact on its revenue in China despite it remaining available for existing users. It also told Reuters it had no knowledge of the investigation prior to the IPO.

Didi shares were sold at $14 each in the IPO which was the largest listing of a Chinese company in the United States since Alibaba (NYSE:BABA) raised $25 billion in 2014. The company had been valued at up to $75 billion as of Friday.

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

A sharp sell-off in Didi shares would further dent confidence of its investors, who were shocked by the announcement of a probe into the ride-hailing firm just two days after its New York stock market debut.

“I think some investors may have taken comfort that going ahead with the listing was under the blessing of the authorities, when now we know it clearly wasn’t,” said Dave Wang, portfolio manager at Singapore’s Nuvest Capital.

Nuvest did not participate in Didi’s IPO.

Didi shares slump 25% in pre-open trade on China crackdown

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.