Didi shares dive more than 20% on NYSE delisting plan

HONG KONG, Dec.3 (Reuters) – Just five months after its debut, ridesharing giant Didi Global (DIDI.N) has announced plans to withdraw from the New York Stock Exchange and continue listing in Hong Kong, an astonishing reversal as it bowed to Chinese regulators angered by its US IPO.

Investor reaction was swift: The company’s shares fell 22.17%, losing about $ 8.4 billion in market value. At their Friday close at $ 6.07, Didi shares have fallen about 57% from their IPO price on June 30.

“After careful research, the company will immediately begin delisting from the New York Stock Exchange and begin preparations for listing in Hong Kong,” Didi said on his Twitter-like Weibo account.

Didi did not elaborate, but said in a separate statement that he will hold a shareholder vote at an appropriate time and ensure that his New York-listed shares are convertible into “freely tradable shares” on another stock exchange globally. recognized.

Market participants said the move increases uncertainty for investors in U.S.-listed stocks of Chinese companies. US-listed shares of Alibaba, Baidu and other Chinese companies fell on Friday. Read more

“If you’re a fund manager and you don’t understand the rules, it’s easier to sell and move your money where you understand the rules of the game best,” said Michael Antonelli, market strategist at Baird.

Sources told Reuters last month that Chinese regulators pressed Didi’s senior executives to develop a plan to delist from the New York Stock Exchange over concerns over data security.

Didi’s board met on Thursday and approved plans for U.S. delisting and Hong Kong listing, two sources familiar with the matter said.

Didi launched an initial public offering of US $ 4.4 billion in June despite requests to put it on hold while Chinese authorities revised its data practices.

The powerful Cyberspace Administration of China (CAC) then quickly ordered app stores to remove 25 of Didi’s mobile apps and called on the company to stop registering new users, citing national security and interest. public.

Didi, whose apps, in addition to carpooling, offer products such as delivery and financial services, remains under investigation.

Redex Research analyst Kirk Boodry, who posts on Smartkarma, said Didi might need to buy shares at the IPO price of $ 14 to avoid legal issues and at the very least pay more than the current share price.

However, uncertainties remained about what the delisting would mean for investors. “There may also be some hope that by doing this Didi’s management will improve its regulatory relationship, but I’m less confident about that,” Boodry added.

The reversal of Didi’s listing in New York – likely to be a difficult and messy process – underscores the enormous influence Chinese regulators have and their bold approach to exerting it.

Billionaire Jack Ma clashed with Chinese authorities after he blew up the country’s regulatory system, leading to the spectacular failure of a mega-IPO for Ant Group last year.

Didi’s move is likely to further discourage U.S. listings of Chinese companies and may prompt some of them to reconsider their status as U.S. listed companies.

“Chinese ADRs face increasing regulatory challenges from US and Chinese authorities. For most businesses, it will be like walking on eggshells trying to please both parties. The delisting will only make things easier, ”said Wang Qi, managing director of fund manager MegaTrust Investment (HK).

Didi plans to register in Hong Kong soon and has no plans to go private, sources familiar with the matter told Reuters.

He aims to complete a dual primary listing in Hong Kong within the next three months and withdraw from New York by June 2022, one of the sources said.

The sources were not authorized to speak to the media and refused to be identified. Didi did not immediately respond to requests for comment from Reuters, and ACC has yet to comment on his announcement.

“Shortly after the IPO, US investors attempted to sue DiDi for failing to disclose its ongoing discussions with Chinese officials. It is unlikely to be better taken,” said William Mileham, analyst actions at Mirabaud.

“It looks like DiDi is not waiting to be double listed, but may well be delisted from the United States before it starts trading on the Hong Kong Stock Exchange.”

HONG KONG HEDGES

Registering in Hong Kong, however, could prove to be complicated, especially within a three-month timeframe, given Didi’s track record of compliance issues and scrutiny of unlicensed vehicles and drivers at part-time.

Only 20 to 30 percent of Didi’s core business in China is fully compliant with regulations requiring three permits for the provision of limousine services, vehicle registration and driver’s licenses, sources previously said.

Didi’s IPO prospectus said he had obtained carpool permits for cities that together made up the majority of his trips. He did not answer further questions about the permits.

These issues had been Didi’s main obstacle to completing an IPO in Hong Kong earlier and it is not clear whether the exchange will approve it now, sources familiar with the matter said on Friday.

“I don’t think Didi qualifies to be on the list before she… has effective protocols in place to manage and secure driver liability and benefits,” said Nan Li, associate professor of finance at the Shanghai Jiao Tong University.

The Hong Kong Stock Exchange (0388.HK) does not comment on individual companies, a spokesperson said.

Didi delivered 25 million groceries a day to China in the first quarter, according to its IPO prospectus. Its largest shareholders are SoftBank’s Vision Fund, with a 21.5% stake, and Uber Technologies Inc (UBER.N), with 12.8%, according to a June filing from Didi.

Sources also told Reuters that Didi was preparing to relaunch its applications in China by the end of the year in anticipation of the Beijing investigation into the company’s cybersecurity being closed.

Reporting by Julie Zhu, Kane Wu, Cheng Leng and Zoey Zhang; Additional reporting by Brenda Goh, Josh Horwitz, Alun John, Sayantani Ghosh, Scott Murdoch, Marc Jones, Lewis Krauskopf and Ira Iosebashvili; Editing by Sumeet Chatterjee, Edwina Gibbs, Jan Harvey, Dan Grebler, Richard Chang and Aurora Ellis

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