GOP Sen. Marco Rubio slams Didi’s US listing as ‘reckless and irresponsible’ – and calls it an unaccountable Chinese company

marco rubio ufo report
Sen. Marco Rubio, R-Fla.

  • Sen. Marco Rubio blasted the “reckless and irresponsible” decision to grant Didi’s US listing in an FT interview.
  • He called Didi “unaccountable” as China’s government blocks US regulators from reviewing its accounts.
  • “That puts the investments of American retirees at risk and funnels desperately needed US dollars into Beijing,” Rubio said.
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Sen. Marco Rubio slammed the “reckless and irresponsible” decision to allow Chinese ride-hailing app maker Didi to list its shares on the New York Stock Exchange, speaking in a statement reported by the Financial Times Wednesday.

Rubio, one of the US government’s most vocal China critics, described Didi as an “unaccountable Chinese company,” and said Beijing’s regulatory crackdown on the tech provider, which sent the stock lower, highlights the risks for US investors.

Didi’s share price plunged more than 19% on Tuesday, after Chinese authorities at the weekend ordered app stores to remove its app from their platforms. The country’s internet regulator earlier launched a review of its data security, and ordered it to stop registering new users.

“Even if the stock rebounds, American investors still have no insight into the company’s financial strength because the Chinese Communist party blocks US regulators from reviewing the books,” Rubio told the FT. “That puts the investments of American retirees at risk and funnels desperately needed US dollars into Beijing.”

The type of business structure used by Didi “deprives foreign investors of vital legal protections they would otherwise enjoy through equity ownership,” the Council of Institutional Investors said in a 2017 paper.

The Republican senator’s comments suggest that Didi’s IPO saga could fuel new efforts by US lawmakers to place tougher hurdles in the way of Chinese companies seeking listings in the US.

Last year, former President Donald Trump signed legislation that banned Chinese companies from being listed on US markets unless they conformed to American accounting standards.

The “Holding Foreign Companies Accountable Act” applies to companies from any country, but the sponsors of the law are seen as targeting it at Chinese companies listed in the US, such as Jack Ma’s Alibaba, tech firm Pinduoduo, and oil giant PetroChina.

Didi’s stock was last trading 4% lower in the pre-market session on Wednesday around 6.30 a.m. ET at $11.97 per share.

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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Chinese ride-hailing company Didi became a retail favorite on its first day of trading

didi dirver
Reuters/Jason Lee

  • Didi has become a retail-investor favorite on its first day of trading, Fidelity data show.
  • The stock topped retail buys in Exela Technologies and AMC Entertainment.
  • Shares of the Chinese ride-hailing company surged as much as 28% during its IPO Wednesday.
  • See more stories on Insider’s business page.

Chinese ride-hailing company Didi has already become a retail-trader favorite in its first day on the public markets, Bloomberg first reported.

According to data from Fidelity, Didi shares ranked number one among retail traders Wednesday, while Exela Technologies, which has seen heightened interest from Reddit investors this week, was second, and well-known meme-stock AMC Entertainment was third.

Didi had more than 32,000 buy orders as of 3:15 p.m. in New York, compared to Exela and AMC, which each had about a third of that, the data showed.

Didi’s debut is the second largest among Chinese companies, after e-commerce giant Alibaba’s initial public offering in 2014. The shares soared as much as 28% in their first day of trading, giving Didi an approximate $86 billion valuation, Markets Insider reported.

The valuation makes Didi the second largest ride-hailing app in the world after Uber, which is valued at $93 billion.

Rumors about a potential IPO spread for several years before the company eventually filed its prospectus earlier this month, Fortune reported. Among Didi’s largest shareholders are investment firm SoftBank, which has a 21.5% stake, Uber, which has a 12.8% stake, and Tencent, which has a 6.8% stake, Fortune said.

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Didi’s IPO will not make investors any money and the business is just as unprofitable as Uber and Lyft, a veteran stock analyst says

Didi Chuxing's D1 at the launch event in Beijing on November 16, 2020
CEO of DiDi Cheng Wei at the D1 launch event in Beijing on November 16, 2020.

  • Didi’s IPO will not make investors any money, said David Trainer, CEO of investment research firm New Constructs.
  • The Chinese ride hailing app jumped as much as 28% during its public debut Wednesday afternoon.
  • Trainer, however, says the unprofitable company faces stark competition, regulatory risk, and low margins.
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Investors should steer clear of Chinese riding hailing company Didi following its IPO, a veteran stock analyst said.

The company jumped as much as 28% to $18 a share when it began trading on the New York Stock Exchange Wednesday afternoon. It priced an upsized offering of 316.8 million shares at $14, the top of its range.

To New Constructs CEO David Trainer, even the mid-range of Didi’s IPO price was too high.

“At a $65 billion valuation, we do not think investors should expect to make any money in Didi’s IPO,” he said in a recent note.

The veteran equity analyst said the company is worth no more than $37 billion, and Softbank, one of its largest backers, needs the IPO more than investors do.

Trainer’s analysis stems from the fact that at a valuation near or above $65 billion, Didi will account for 41% of the world’s ride sharing and food delivery market. He doesn’t expect the company to hit that given the vast competition for market share. Additionally, Trainer sees Didi’s business model as just as unprofitable as Uber and Lyft. Didi has an estimated 90% of market share in China, yet hasn’t generated a profit yet, and saw losses accelerate during the pandemic, he added.

“Uber and Lyft have shown investors that ride sharing is not a profitable business because of intense competition, low margins, and a lack of differentiation between services,” Trainer said.

He also doesn’t see Didi’s business model evolving as quickly as some investors forecast.

“While bulls claim that autonomous vehicles will ultimately eliminate driver costs, such a reality is years away at
best,” Trainer said. “In the meantime, Didi will continue to offer services below cost and provide driver incentives to attract drivers to the platform, even at the detriment of profitability.”

The analyst also warned that Didi is at risk of increased regulation in China. In a filing, the company outlines that its business may be subject to heightened regulatory scrutiny by the Chinese government, Trainer said.

He pointed to a Reuters report from June that the State Administration for Market Regulation (SAMR) has begun an antitrust probe into Didi Global, specifically looking at whether the firm used “competitive practices that squeezed out smaller rivals unfairly.” The SAMR also fined Didi in May for violating anti-monopoly rules.

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