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.
  • See more stories on Insider’s business page.

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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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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Didi’s US shares plunge 25% after China cracks down on ride-hailing app, just days after $68 billion IPO

Didi Chuxing China ride-hailing app
Didi is China’s biggest ride-hailing app.

Chinese ride-hailing app Didi dropped as much as 25% on the US stock market on Tuesday after China cracked down on the company, only days after its blockbuster initial public offering in New York.

Didi’s US-listed shares were last down 21.98% by 9.50 a.m. ET, to $12.10. US stock markets reopened on Tuesday after Monday’s 4th of July holiday.

Chinese authorities on Sunday ordered app stores to remove Didi Chuxing, the country’s biggest ride-hailing company, from their platforms. The Cyberspace Administration of China cited serious violations in the collection and use of personal data.

The crackdown came less than a week after Didi’s shares started trading on the New York Stock Exchange in one of the biggest IPOs of the last 10 years. Didi hit the market on Wednesday, with shares closing at $14.14, giving the app a market capitalization of $68 billion.

The company said China’s move to lock out new users may have an adverse impact on its revenue in its home market.

Uber, which is the second-biggest US holder of Didi stock, fell 1.82% when markets opened.

Read more: POWER PLAYERS: These 9 Uber executives are fighting the company’s increasingly messy gig-economy policy battles

Shares of Full Truck Alliance and Kanzhun, two Chinese tech companies who also recently listed in the US, dropped 19.95% and 9.38% respectively. The declines came after China expanded its clampdown to put new restrictions on the two companies on Monday.

“China is cracking down on big tech, but the decision to remove [Didi’s] app from domestic platforms appears to be timed for maximum impact and embarrassment,” said Neil Wilson, chief market analyst at trading platform Markets.com.

“China’s Communist Party is bristling at the number of Chinese companies listing in the US this year, but there is a genuine concern at the heart of this – regulators are not impressed at the way Didi and other Chinese tech companies handle data.”

Axel Springer, Insider Inc.’s parent company, is an investor in Uber.

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Didi plunges 30% in premarket trading after China cracks down on ride-hailing app, days after $68 billion US IPO

FILE PHOTO: The company logo of ride hailing company Didi Chuxing is seen on a car door at the IEEV New Energy Vehicles Exhibition in Beijing, China October 18, 2018.  REUTERS/Thomas Peter/File Photo
Didi Chuxing is China’s biggest ride-hailing app.

  • Didi shares plunged as much as 30% in premarket trading Tuesday after China cracked down on its app.
  • Didi Chuxing listed on the New York Stock Exchange on Wednesday in a $68 billion IPO.
  • Chinese authorities are taking a tough line with the ride-hailing app maker and other tech companies.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Shares of Chinese ride-hailing app maker Didi plunged as much as 30% in premarket trading on the US stock market on Tuesday, after China cracked down on the company only days after its blockbuster US initial public offering.

Didi’s American depository receipts then pared some of their losses to stand 20.99% lower at $12.27 as of 06.15 a.m. ET. US equity markets will reopen on Tuesday after Monday’s 4th of July holiday.

Chinese authorities on Sunday ordered app stores to remove apps from Didi Chuxing, the country’s biggest ride-hailing company, from their platforms. The Cyberspace Administration of China cited serious violations in the collection and use of personal data.

The crackdown came less than a week after Didi’s shares started trading on the New York Stock Exchange in one of the biggest IPOs of the last 10 years. Didi hit the market on Wednesday, with shares closing at $14.14, giving the app a market capitalization of $68 billion.

Uber, which is the second-biggest US holder of Didi stock, fell 1.37% in premarket trading.

Read more: POWER PLAYERS: These 9 Uber executives are fighting the company’s increasingly messy gig-economy policy battles

Shares of Full Truck Alliance and Kanzhun, two Chinese tech companies who also recently listed in the US, dropped 16.04% and 10.49% respectively in premarket trading. The declines came after China expanded its clampdown to put new restrictions on the two companies on Monday.

“China is cracking down on big tech, but the decision to remove [Didi’s] app from domestic platforms appears to be timed for maximum impact and embarrassment,” said Neil Wilson, chief market analyst at trading platform Markets.com.

“China’s Communist Party is bristling at the number of Chinese companies listing in the US this year, but there is a genuine concern at the heart of this – regulators are not impressed at the way Didi and other Chinese tech companies handle data.”

Axel Springer, Insider Inc.’s parent company, is an investor in Uber.

Read the original article on Business Insider

Didi soars 28% in largest IPO debut for a Chinese firm since Alibaba, valuing ride-hailing firm at $86 billion

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


Shares of Didi soared as much as 28% in its IPO debut on Wednesday, lending the Chinese ride-hailing platform a valuation of about $86 billion.

The firm priced its IPO at $14 per share and raised about $4.4 billion in proceeds, making it the largest IPO for a Chinese firm since Alibaba in 2014. At the IPO price, Didi was valued at about $67 billion. The company sold 317 million shares, and had guided for an IPO price range of $13-$14.

Didi is the second largest ride-hailing app by market value in the world. Uber currently sports a valuation of about $93 billion, while Lyft trades at a $20 billion valuation.

The company generated $1.6 billion in losses on $21.6 billion in revenue in 2020, representing a year-over-year revenue decline of about 10% due to the COVID-19 pandemic, according to its SEC filings.

Didi sports a number of high profile investors, including Apple, which invested $1 billion in the ride-hailing company in 2016. Meanwhile, the SoftBank Vision Fund holds a 21.5% stake in Didi, while Uber and Tencent own a 12.8% and 6.8% stake in the company, respectively, according to Bloomberg.

Whether US investors will have a strong appetite for shares of Didi over the long-term is still up in the air, as some investors have been burned before by high profile IPOs of Chinese companies. Last year, Starbucks competitor Luckin Coffee plunged more than 80% after it admitted to fabricating $310 million in sales. The Chinese-based coffee chain eventually filed for Chapter 15 bankruptcy.

Additionally, both the Trump and Biden administration have followed through with banning certain Chinese companies from US stock market exchanges.

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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.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

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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