Didi (DIDI) Gains on WSJ Report It Considers Going Private, Company Denies

(Updated - July 29, 2021 7:01 AM EDT)

Shares of Didi Global (NASDAQ: DIDI) soared in pre-open Thursday on a report in the Wall Street Journal that the ride-hailing company is considering delisting to please China’s regulatory bodies.

Didi share price initially exploded about 50% before paring back gains to now trade about 13% in the green. The company dismissed the WSJ report on its official Weibo account.

The statement from Didi read:

"DiDi Global Inc. noted a Wall Street Journal article published today saying the Company is considering going private. The Company affirms that the above information is not true. The Company is fully cooperating with the relevant government authorities in China in the cybersecurity review of the Company."

According to WSJ, Didi has been considering compensating investors for losses they have incurred since the company went public. The company has obtained support from cybersecurity watchdog for such plans, the report adds.

Didi has been in talks with regulators, investors, and government agencies on how to resolve troubles that emerged in recent weeks. The delisting option is one of the primary options and could involve a tender offer for its publicly traded shares.

Didi priced its shares at $14 apiece in the last week of June before they almost hit $18 on the first trading day. However, subsequent troubles and the heat coming from the state regulator pushed shares to close at $8.87 Wednesday.

As a result, law firms representing shareholders have filed securities class-action lawsuits against the company, its IPO underwriters, and board. Lawsuits allege that the company failed to properly inform investors ahead of the IPO.

A private offer could be funded by Didi’s pile of cash raised through the IPO. While the price still isn’t determined, it could come at around $14-per-share IPO price. Underwriters are talking to investors about the delisting options, as well as the pricing they are willing to accept.

“Taking Didi private at or near its IPO price, a possibility reported by Dow Jones, may be the best way for the company to resolve its regulatory issues and placate investors, in our view. Going private would enable Didi to hash out regulatory concerns away from the public eye and could eventually lead to a listing in a venue perceived by Chinese regulators as more favorable to sensitive companies, such as Hong Kong,” Bloomberg Intelligence analysts Matthew Kanterman and Tiffany Tam, said.

SoftBank, Didi’s largest single-shareholder with a 20% stake, is unlikely to help fund a deal. An alternative is reaching out to state-backed investors, the WSJ report further notes.

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