Chinese regulators call in Didi and 10 other ride-hailing companies, to tell them to fall in line immediately

Didi Global stock symbol
Chinese ride-hailing app Didi Global raised $4.4 billion in its debut on the New York Stock Exchange.

  • Five Chinese authorities summoned Didi, Meituan and 9 other ride-hailing services to meetings about compliance with rules.
  • The platforms must fix illegal operations such as recruiting unlicensed drivers and vehicles, they said after the Wednesday meetings.
  • It extends Beijing’s regulatory crackdown on the internet and education sectors to the ride hailing industry.
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Chinese authorities have called in major ride-hailing platform companies, including Didi, to tell them to fall in line with regulations as Beijing’s crackdown on influential sectors continues.

Five government agencies held a joint meeting Wednesday with the platform providers to tell them to check their operations and fix issues such as the use of unapproved drivers and cars, the Department of Transport said in a Thursday statement posted to Weixin.

“The interview pointed out that recently, some platform companies have adopted a variety of marketing methods, vicious competition, and recruited or induced unlicensed drivers and vehicles to ‘bring cars to join’ to carry out illegal operations, disrupt the fair competition market order, and affect the safety and stability of the industry,” the department said in the statement, translated from the original Chinese.

Didi, which has been under close scrutiny from Chinese authorities since going public on New York’s Nasdaq in June, was one of the companies summoned. Also in the meeting were regional industry heavyweights such as e-commerce giant Meituan’s ride hailing service, Geely’s Cao Cao and T3.

Officials laid out five requirements for the platforms. One was that they must operate in strict compliance with laws and regulations, which means they must stop using unlicensed drivers and vehicles immediately.

Another, on ensuring fair competition, said the companies must avoid using false inducements to attract drivers and ensure that drivers are paid fairly – meaning they should not take too big a commission for completed rides.

“The interview requires that each platform company should review its own problems, immediately rectify non-compliance behaviors, jointly maintain a fair and competitive market order, and jointly create a good environment for the standardized and healthy development of the online car-hailing industry,” the Department of Transport’s statement said.

Didi, Meituan and other companies did not immediately respond to Insider’s request for comment.

In recent months, China’s regulators have begun a crackdown on key sectors such as tech, education and internet companies, most notably tightening rules around competition and customer data.

Investors have grown increasingly concerned that this has strengthened Beijing’s grip on private companies and data, and stocks have dropped sharply on news of higher scrutiny of industries.

Meituan closed 0.08% higher on the Hong Kong stock exchange, while Cao Cao’s parent company Geely gained 1.81% in Hong Kong by the end of the trading Thursday. Didi’s New York-traded shares were down 1.09% in premarket trading as of 7:22 am E.T. on Thursday.

“Another day, another clampdown. Dip-buyers in China equities will keep dipping their toes. However, I believe we are a long way still from repricing China equities to a level that balances the Government’s ‘enthusiasm’ for common prosperity,” Jeffrey Halley, senior market analyst at Oanda, said in a note.

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China mulls requiring US IPO hopefuls to hand over their data amid a crack down on overseas listings, report says

Red flags fly in front of the Great Hall of the People as the third session of the 13th National People's Congress (NPC) holds opening meeting on May 22, 2020 in Beijing, China.
Great Hall of the People in Beijing, China.

  • Regulators in Beijing mull requiring companies looking to go public in the US to hand over their data, Reuters reported.
  • The information will be monitored by third-party firms, preferably state-backed.
  • Regulators believe this will limit the chances Chinese companies will transfer their data overseas.
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Regulators in Beijing mull requiring data-rich Chinese companies looking to go public in the US to hand over their data to third-party firms amid a broader crackdown on overseas listings, Reuters first reported.

Officials believe Chinese companies seeking to IPO would be limited in their ability to transfer data if third-party firms, preferably state-backed ones, are brought in to manage and monitor their data, sources told Reuters.

The proposed plan, one among the many being considered, comes amid Beijing’s growing concerns that listing overseas will force Chinese firms to hand over their data foreign regulators, sources told Reuters.

For instance, in July, the US Securities and Exchange Commission announced it will stop processing IPO listings from Chinese companies until they meet its new disclosure requirements, putting many firms at risk of being delisted.

In August, SEC chief Gary Gensler further warned investors in US-listed Chinese stocks, reminding Americans that the Chinese government doesn’t let foreigners own or invest in many of its companies.

Beijing in the recent months has intensified its clampdown on Chinese technology companies and internet platforms that went public in the US.

Among the most high-profile examples was ride-hailing giant Didi, which has been mired in regulatory troubles following its blockbuster IPO in the US.

Didi went public on June 30 despite an investigation from the Cyberspace Administration of China about its data security practices. Since then, Chinese regulators have been considering serious penalties for the company, according to various reports.

Didi, however, has been said to be considering giving up its control of data to placate Chinese regulators.

The ongoing crackdown has dampened investor sentiment, especially towards tech companies, which are known to have troves of data in their possession.

Regulators have yet to finalize their decision, sources told Reuters.

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Didi climbs as the ride-hail giant reportedly considers handing over control of data to placate Chinese regulators

Didi Global stock symbol
Chinese ride-hailing app Didi Global raised $4.4 billion in its debut on the New York Stock Exchange.

  • Didi stock climbed Friday as Bloomberg reported the firm may give up control of data to placate Chinese regulators.
  • The firm considered various proposals, including handing over data management to a third party, Bloomberg reported.
  • Didi shares were up around 6% before the opening bell on Friday.
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Shares of Didi Global climbed Friday as reports circulated that the ride-hailing giant is mulling giving up its control of data to placate Chinese regulators that have cracked down on the firm following its US IPO.

The ride-hailing firm, Bloomberg first reported, has suggested various proposals to regulators, including handing over its data management to a third party, which authorities were said to have have preferred. Didi’s data is crucial to its operations as the company coordinates between some 400 million riders and drivers daily.

Didi shares were up as much as 15% during Friday’s pre-market trading, paring gains to 6% shortly before the opening bell.

Deliberations are at a preliminary phase and any outcome is still possibly months away, sources told Bloomberg.

Reports have swirled in recent weeks that China is considering serious penalties for Didi, from suspending certain operations to introducing a state-owned investor, Bloomberg reported. Among the harsher measures would be to force the company to delist or withdraw its US shares.

Didi’s New York Stock Exchange debut was the second-largest among Chinese companies after e-commerce giant Alibaba‘s IPO in 2014.

While Didi shares soared as much as 28% during its public trading debut, the besieged ride-hailing company’s stock has since lost more than half its value.

Not long ago, the Chinese firm was eyeing a $70 billion valuation, but roughly over a month after its debut, the company is now worth less than $40 billion.

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Chinese education stocks plunge as Beijing reportedly wants to turn tutoring companies into non-profits

students in china
Primary school students attend a class in Beijing.

  • Shares of Chinese tutoring companies are crashing Friday after Bloomberg reported that Beijing is targeting the sector.
  • China is considering asking education tech companies in the $100 billion sector to turn into non-profits.
  • Shares of Tal Education Group and Gaotu Education were among those being hammered in the US market.
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Shares of Chinese education companies sank Friday, losing more than half their value following a Bloomberg report that China may ask companies that offer school curriculum tutoring to become non-profits, a move that could severely damage the country’s $100 billion education technology industry.

Beijing is considering rule changes that could lead to platforms being blocked from raising capital or going public, the report said, citing unnamed sources. Listed firms will likely no longer be allowed to invest in or acquire education firms teaching school subjects and foreign capital investment into the sector may be banned, according to the report which also said an education ministry spokesman said relevant policies are still being formulated.

NYSE-listed shares of Tal Education Group, which runs after-school tutoring programs for primary and secondary school students, tumbled by 55% in premarket trade and New Oriental Education & Technology Group slid 62%. Gaotu Techedu, formally known as GSX Techedu, dropped 59%. In Hong Kong, Koolearn Technology sank 28%.

NYSE-listed shares of Alibaba fell 3% as the e-commerce heavyweight has invested in the online education industry.

The report said China is taking aim at the sector in part because parents pay expensive fees for tutoring and the country, in serving a top priority of lifting the birth rate, last month released measures aimed at encouraging births and lowering child-related expenses. China in June said couples will be allowed to have three children.

The potential threat to the education tech sector also comes as China has been cracking down on companies with listings in the US and foreign equity markets, with Beijing’s concerns ranging from data security and disclosure requirements. Investment banks are moving to steer Chinese IPOs away from the US market and into Hong Kong, according to a Financial Times report.

Ride-hailing giant Didi Global is among Beijing’s targets, with regulators launching a cybersecurity review just days after the company’s shares began trading in the US on June 30. Didi shares fell 13% early Friday, extending losses from Thursday on news that China is considering serious penalties for the company following its IPO.

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Didi falls as Chinese officials send police to offices as part of sweeping cybersecurity probe

A receptionist wearing a mask looks up from a desk at Didi office in Beijing.
A receptionist looks up from an office for drivers of Didi in Beijing.

  • Didi shares dropped Friday after police and other regulators went to the ride-hailing app operator’s offices in Beijing.
  • The Chinese government sent a task force of seven units including the internet regulator for the on-site visit as part of a cybersecurity review.
  • Didi shares have slumped in the wake of the review, which was first launched earlier this month.
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Shares of Didi dropped Friday after reports that police in China went to the offices of the ride-hailing company as part of a cybersecurity review that was launched just after Didi raised $4.4 billion in an initial public offering in New York.

A task force of seven ministries including the national security and public security ministries and the Cyberspace Administration of China entered Didi’s offices on Friday to conduct what is China’s first cybersecurity review, according to the South China Morning Post.

NYSE-listed shares of Didi fell 3% during the regular session after losing as much as 8.6% in premarket trade.

The on-site visit is part of what Chinese officials have said are efforts to prevent national data security risks and to maintain national security. The Cyberspace Administration of China, the country’s internet regulator, last week ordered online stores to pull Didi’s apps after determining the apps used data that was collected illegally by Didi.

Didi said two weeks ago when the probe was launched that it would cooperate. The review triggered a selloff, and the stock through Thursday had dropped by more than 12% since its June 30 IPO. Didi was worth as much as $68 billion following its trading debut, making it one of the biggest IPOs in the US in the last 10 years.

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Didi pares losses after China cybersecurity review sends stock plummeting

A Didi logo is seen at the headquarters of Didi Chuxing in Beijing, China November 20, 2020. REUTERS/Florence Lo/File Photo/File Photo
A Didi logo is seen at the headquarters of Didi Chuxing in Beijing on November 20, 2020.

  • Shares in Didi Chuxing closed 7% higher on Friday, paring steep losses over the course of the week.
  • Chinese regulators on Friday moved to shutter dozens of apps run by Didi.
  • Some members of Congress have blasted China’s move, calling for an SEC investigation into whether US investors were misled.
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Shares in Didi Chuxing rose more than 7% on Friday days after a surprise probe by China’s cybersecurity regulator sent the stock tumbling.

The stock closed at $12.03, up 7.3% on the day.

The company’s US debut on June 30 saw shares peak as high as $18. But the weekend announcement from authorities that Didi had violated Chinese privacy laws crashed the stock as soon as markets opened. It bottomed out at $11 before regaining some lost ground.

But the bad news hasn’t let up for Didi. Chinese regulators on Friday moved to shutter dozens of apps run by Didi, as well as cracking down on third-party websites giving access to its services. The company’s main app had been removed over the weekend as the cybersecurity review was launched.

Some members of Congress have blasted China’s Didi move, calling for an SEC investigation into whether American investors were misled. Didi raised $4.4 billion in its IPO.

“When did Didi know that it was exposed to regulatory risk? And even if Didi didn’t know for certain at the time of the IPO that its app would be banned, why didn’t it disclose that risk in its prospectus?” former SEC commissioner Joseph Grundfest told the Financial Times.

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China is considering a rule change that would close a loophole allowing domestic firms to IPO overseas, report says

Did Chuxing app uber china
  • Chinese regulators are mulling rule changes that would block offshore listings by domestic companies, Bloomberg reported Wednesday.
  • The rule changes would close a loophole used by Chinese tech companies to launch IPOs in the US.
  • The report follows data security reviews on ride-hailing service Didi whose shares began trading in the US last week.
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Authorities in China are considering a rule change that would allow them to stop domestic firms from listing publicly in overseas markets, according to a Bloomberg report. The loophole has previously been used by Chinese giants like Alibaba and Tencent to IPO in the US.

The report arrives after Chinese regulators initiated a data security review on ride-hailing service Didi and on two other companies after their shares recently began trading in the US equity market. China has been clamping down on technology companies over issues ranging from security to privacy to anti-competitive behavior.

The China Securities Regulatory Commission is spearheading the revisions. Once changed, the rules would require companies that are structured using a so-called Variable Interest Entity model to seek approval before going public in Hong Kong or the US. The overseas listings rules have been in place since 1994 and do not reference companies registered in places like the Cayman Islands, sources told Bloomberg.

The proposed rule changes in China could dent the business prospects of the Wall Street banks who work on the stock offerings. Chinese companies over the past 10 years have raised about $76 billion through first-time share sales in the US, the report said.

Didi shares that began trading in the US last week have plunged since China said it would conduct a cybersecurity review on the company. The stock on Tuesday dropped below the IPO price of $14 after Chinese authorities ordered app stores to remove Didi from their platforms after the Cyberspace Administration of China alleged violations in the collection and use of personal data.

Read more: Goldman Sachs names 30 stocks to buy for double-digit revenue growth in 2022 – and 4 sectors expected to beat the S&P 500’s sales growth

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