China Demands That Didi Be Removed From The US Exchanges Due To Security Concerns

Due to data security fears, Chinese authorities have inquired top leaders at Didi Global Inc (DIDI.N) to come up with a plan to de-list from the New York Stock Exchange.

According to folks familiar with the issue, Chinese authorities have asked Didi Global Inc.’s leading executives to come up with a plan to disband from U.S. exchanges, an extraordinary proposal that is probable to renew concerns about Beijing’s motives for its massive tech industry.

The nation’s tech watchdog seeks management to delist the company from the New York Stock Exchange due to concerns about delicate data leakage, according to the people, who asked to remain anonymous since they were exploring a delicate issue. The Cyberspace Administration of China, the nation’s data security service, has guided Didi to operate out specifics, subject to government permission, they said.

After the report, the share prices of Didi investors SoftBank Group Corp (9984.T) and Tencent Holdings (0700.HK) dropped more than 5 percent and 3.1 percent, respectively.

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Proposals under consideration include straight-up privatization or a share float in Hong Kong followed by delisting from the U.S., according to the report. If the deregulation goes ahead, the suggestion will most likely be at least the $14 Initial public offering value, because a lower bid so soon after the June IPO could result in lawsuits or shareholder opposition, according to the report.

Didi’s stock had fallen 42 percent to $8.11 as of Wednesday’s close as it came out publicly in June.

Didi’s initial public offering in New York this summer enraged Beijing. According to reports, the firm ran afoul of Chinese regulators when it proceeded with its New York listing despite the regulator’s request that it be postponed while a cybersecurity overview of its data practices was executed.

Shortly after, the CAC began an inquiry into Didi’s acquisition and use of personal data. It claimed that data had been unlawfully collected and instructed app stores to remove 25 Didi-operated mobile apps.

Didi reacted at the moment by stating that it had ended registering new customers and would make adjustments to cooperate with national security and personal data consumption rules, as well as to protect users’ rights.

Didi is presently regulated by the management group of co-founder Cheng Wei and President Jean Liu, who received 58 percent of the voting power after the company’s public offering in the United States. Didi’s largest minority stockholders are SoftBank and Uber Technologies Inc.

According to a June statement by Didi, SoftBank Vision Fund owns 21.5 percent of Didi, influenced by Uber Technologies Inc (UBER.N) with 12.8 percent and Tencent with 6.8 percent.

Even if Didi moves its listing to Hong Kong, it will have to discuss the regulatory concerns about data security. The company may be forced to hand over control of its data to a third party, further lowering its price.

Didi, which was once lauded for taking down Uber in China, has now become a case study for the Chinese government’s wider effort to limit the power of internet giants. Xi Jinping’s government, eager to encourage his perspective of “common prosperity,” has aimed at an internet market that has amassed massive wealth by operating outside the law, revalued an unusual amount of billionaires, and enhanced domestic and international investors.

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