Didi (DIDI) Falls Again As Beijing Weighs 'Unprecedented' Penalty After US IPO - Report

July 22, 2021 7:52 AM EDT
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Shares of Didi (NASDAQ: DIDI) are down nearly 3% in pre-open trading Thursday after Bloomberg reported that China is considering handing an “unprecedented penalty” to the ride-sharing company for conducting its US IPO.

Beijing has seen the decision to go ahead with the US IPO decision as a direct threat to its authority, according to the report. Regulators previously hinted to Didi to cancel its US IPO and move to Shanghai or Hong Kong, and also focus on data collection challenges.

“It’s hard to guess what the penalty will be, but I’m sure it will be substantial,” said Minxin Pei, a professor of government at Claremont McKenna College in California.

Among other things, China is weighing whether just to fine Didi, or introduce more severe penalties, such as suspension of certain operations or introduce a state-owned investor. Arguably the worst-case scenario would be forced de-listing from the NYSE.

“Beijing wants the internet sector to understand that cybersecurity and data security are now among the government’s top priorities, and individual companies’ profit can be sacrificed when cybersecurity and data security may be exposed to risks,” said Feng Chucheng, an analyst with consultancy Plenum in Beijing.

Didi raised $4.4 billion in a blockbuster US IPO, days before regulators started a review of the company’s practices. Multiple visits of regulators to Didi’s HQ sent shares lower.

Didi share price is now threatening to penetrate below the $11 handle as it trades at $11.23 at 07:50 EST. The all-time low comes in at $11.06.

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