Didi shares are down 20% with the intention of removing them from the NYSE

By Julie Zhu and Kane Wuren

HONG KONG (Reuters) – Just five months after its debut, Didi Global travel giant announced on Friday that it would be listed on the New York Stock Exchange and begin trading in Hong Kong as a shocking setback bows to Chinese regulators in its anger. US IPO.

Conditions fell by about 20% after switching between pre-market gains and losses, with investors initially betting that the move would calm Beijing down and revive its business opportunities at home.

“After a thorough investigation, the company will immediately begin listing on the New York Stock Exchange and begin preparing for listing in Hong Kong,” Didi said on a similar Twitter account (NASDAQ :).

Didi did not provide details, but said in a separate statement that it would hold a shareholder vote at the right time and ensure that the shares listed in New York would become “freely tradable shares” in another globally recognized exchange.

Didi shares, which opened on the NYSE on June 30 for $ 14, were trading at $ 6.03 on Friday evening.

Sources told Reuters last month that Chinese regulators had pressured Didi’s top management to come up with a plan to withdraw from the New York Stock Exchange because of concerns about data security.

Didi’s council met on Thursday and approved plans to remove the U.S. list and the HK list, according to two sources familiar with the matter.

Didi made an initial U.S. $ 4.4 billion public offering in June, despite being asked to cancel while reviewing data practices.

China’s powerful cyberspace administration () immediately ordered app stores to remove Didi’s 25 mobile apps and stop the company from registering new users, citing national security and public interest.

Didi, whose applications, in addition to ride-hailing, offer products such as shipping and financial services, continues to research.

Redex Research analyst Kirk Boodry, who publishes on Smartkarma, said that Didi shares should be bought at a price of $ 14 IPO to avoid legal issues and to pay at least more than the current share price.

However, uncertainty remained as to what the removal would mean for investors. “In doing so, there may also be hope that Dido’s management will improve its regulatory relations, but I have less confidence in that,” Boodry added.

Changing Didi’s list in New York – which is likely to be a difficult and confusing process – underscores the great power of Chinese regulators and their bold attitude toward using it.

Millionaire Jack Ma has lashed out at Chinese authorities after a crackdown on the country’s regulatory system, which last year caused the catastrophe of a mega-IPO of the Ant Group.

Didi’s move is likely to recommend that the U.S. list of Chinese companies be expanded and encourage some to publicly reconsider their status as a U.S. trading company.

“China’s ADRs are facing increasing regulatory challenges on the part of both the US and Chinese authorities. For most companies, it will be like walking on eggshells trying to please both sides. Removal will make things easier,” said Wang Qi, CEO of MegaTrust Investment Fund. . (HK).

Didi plans to continue with the Hong Kong list soon and does not seek to make it private, sources familiar with the matter told Reuters.

Completing a double major list in Hong Kong over the next three months and removing it from New York by June 2022, one source said.

Sources were not allowed to speak to the media and refused to be identified. Didi did not immediately respond to Reuters’ comments, and the CAC has not yet commented on his announcement.

“The U.S. investor wanted to sue DiDi because he did not disclose his ongoing talks with the Chinese authorities in a short time. That is unlikely to be taken for granted,” said William Mileham Mirabaud, a stock analyst.

“It looks like DiDi isn’t waiting to double its listing, but it could be removed from the U.S. before HK begins trading on the stock exchange.”

GRAPHIC-Didi’s uneven walk since being listed in New York https://graphics.reuters.com/CHINA-DIDIGLOBAL/dwvkrzdjxpm/chart.png

HONG KONG HAZKOAK

Listing in Hong Kong, however, can be complicated, especially within three months, given Didi’s history of compliance issues and studies on unlicensed vehicles and part-time drivers.

In China, only 20-30% of Didi’s main travel business fully complies with the rules that require three permits to provide ride services, vehicle licenses and driver’s licenses, sources said earlier.

Didi’s IPO brochure said he had obtained permits to travel to the cities that made up the majority of the rides. No more answering questions about permissions.

These issues were Didi’s main obstacle to an IPO in Hong Kong earlier and it is unclear whether the stock market will accept it now, sources with knowledge of the subject said on Friday.

“I don’t think Didi is able to list anywhere before … he establishes effective protocols for managing and ensuring the responsibility and benefits of drivers,” said Nan Lik, an associate professor of finance at Shanghai Jiao Tong University.

A spokesman for the Hong Kong Stock Exchange said it does not comment on individual companies.

“After two decades of Chinese companies taking advantage of the U.S. market in search of capital and a fairly good exit from U.S. investors, it seems that the symbiotic relationship is coming to an end,” Jones O’Rourke, JonesTrading’s chief market strategist, wrote Thursday night. .

“We are confident that most Chinese companies will proceed with the temporary removal of US shares by converting US shares to the Hong Kong list.”

Didi offered 25 million daily trips to China in the first quarter, its IPO prospectus said. Its main shareholders are SoftBank’s Vision Fund, with a 21.5% stake, and Uber Technologies (NYSE 🙂 Inc, with 12.8%, according to documentation released by Didi in June.

Sources also told Reuters that Didi was preparing to restart its applications in China by the end of the year, believing that the Beijing company’s cybersecurity investigation would be completed by then.