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.
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.
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.
The Cyberspace Administration of China said Sunday on its website that the investigation found the Didi app “has serious violations of laws and regulations” in both collecting and using personal information. App stores were notified to remove Didi and “strictly follow the legal requirements.” The statement did not say what kind of information was allegedly being unlawfully collected or used.
Didi said in a statement posted on Weibo that it would comply and make necessary changes. Registration of new users has been suspended and the app “will be removed from the shelves for rectification in strict accordance with the requirements of the relevant departments,” the statement said.
Users who have downloaded the Didi App can use it normally, and passengers’ travel and driver’s orders will not be affected, the statement said.
Didi is the second-largest ride-hailing app by market value in the world with a valuation of about $86 billion. Uber currently has a valuation of about $93 billion, while Lyft trades at a $20 billion valuation.
Shares of Didi soared as much as 28% in its IPO debut in New York on Wednesday. The company’s debut was the second-largest among Chinese companies after e-commerce giant Alibaba’s initial public offering in 2014.
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.
Uber drivers in some cities are making at least $40 an hour, the ride-hailing company said in its first-quarter earnings call.
Median earnings for drivers in New York City and Philadelphia is $37 per hour, before tips, Uber Chief Executive Officer Dara Khosrowshahi said on Wednesday’s call. In Chicago, it’s $36, and in Austin, it’s $33, he said.
“We know that drivers often work simultaneously on other apps, so their total earnings are likely even higher,” he said. “In other words, looking at the more appropriate measure of active time on Uber, median earnings are at or above $40 an hour in several US cities.”
Uber listed its median earnings per hour by city on April 7, but those earnings don’t include tips or incentives.
The company has spent hundreds of millions of dollars trying to incentivize drivers to come back or start driving for the ride-hailing app after about half of them left during the COVID-19 pandemic.
An Uber spokesperson told Insider that drivers’ “top two concerns about returning to the platform are COVID safety and the level of earnings. That’s why our driver stimulus announcement included info on how high earnings are before any money is spent on incentives and reiterated our commitment to safety, including the rider mask mandate.”
For the month of March, Uber reported its highest-ever bookings in its history. But even amid a ride-hailing rebound, Uber and its competitor Lyft are still struggling to get drivers back on the road amid a worker shortage.
Lyft said yesterday pay for its drivers is soaring amid high demand for rides and a low number of workers. The company has also incentivized workers by enhancing its app so that drivers can find more opportunities to maximize their earnings.
On the Uber earnings call, one analyst noted drivers have to spend money to rent a car or buy a used car. The CEO said the company has programs to help drivers get on the road, adding right now the biggest issue for workers is safety.
“We think that issue is being dealt with as it relates to vaccines,” Khosrowshahi said.
The International Brotherhood of Teamsters General Fund, an investor in Uber, sent a letter to other Uber shareholders Thursday urging them to vote for a proposal that would force the company to disclose more details each year about its lobbying efforts.
“Uber’s lobbying is not only substantial, geographically extensive and highly innovative, but is profoundly controversial and raises critical questions over the sustainability of the company’s business model,” Ken Hall, the fund’s general secretary-treasurer, wrote in the letter.
“It may be tempting to view Uber’s current disclosures as a good-faith effort to address concerns over the transparency of its lobbying activities; but this would be a mistake,” Hall added.
Uber investors will vote on the proposal – which would require Uber to publish an annual report disclosing its lobbying policies, how much it spent on direct, indirect, and grassroots lobbying, and which groups the money went to – during the company’s annual shareholder meeting on May 11.
Uber has urged investors to vote against the proposal, citing its “existing risk management practices and current high level of transparency and accountability around political and lobbying activities and expenditures.”
The ride-hailing company did not respond to a request for comment on this story.
Uber and other companies that depend heavily on cheap contract labor have ramped up their lobbying efforts over the past few years as federal and state regulators look to crack down on “gig” economy businesses that have for years operated in a regulatory gray area.
Uber spent a record $2.6 million lobbying the federal government in 2020, according to OpenSecrets. The company also contributed $30 million to a $200 million campaign to persuade California voters to pass Proposition 22, exempting it from a major state labor law, AB-5, and making Prop 22 the most heavily lobbied ballot measure in the state’s history.
A key aspect of that campaign was Uber’s indirect and “grassroots” lobbying through groups that helped the company broadcast its message to voters without telling them who the messenger was. In one case, an Uber-funded group sent mailers to California residents designed to trick them into believing progressive groups were supportive of Prop 22 (many prominent progressives actually opposed the measure).
In December, the Teamsters Union filed shareholder proposals at both Uber and Lyft, arguing both companies have failed to provide investors with sufficient information about the money they spend on lobbying – particularly grassroots lobbying, which is subject to less stringent disclosure requirements and often requires investors to dig through complicated and incomplete disclosures for each individual state.
The fund argued in its letter Thursday that Uber investors should push for more transparency so they can understand how much the company’s business model depends on its lobbying efforts being successful, and whether its reputation could suffer because of the positions it’s taking.
“Transparency is vital to understanding how Uber is navigating the acute reputational risks that come with lobbying around matters as emotive as wage theft and workers’ rights,” it wrote, adding: “But perhaps most crucially, disclosure is key to any evaluation of the long-term sustainability of a business model built around the heavy and controversial use of independent contractors.”
Chinese ride-hailing firm Didi Chuxing is said to be speeding up plans for its initial public offering to make the most of the post-pandemic environment, according to Bloomberg.
Didi is aiming for an IPO as early as this summer, at a valuation above the $62 billion it secured at its last funding round, making it one of China’s most valuable tech firms, Bloomberg said, citing sources.
The company brought forward its IPO plans by a quarter, owing to China’s lead in controlling the COVID-19 crisis. It was previously targeting late 2021. But plans are in early stages, timing is still uncertain, and a venue for its market debut hasn’t been decided yet.
If Didi lists its shares in Hong Kong, the company could raise about $9 billion, potentially making its IPO one of the largest tech debuts of 2021, Bloomberg said.
Japan’s SoftBank, the biggest investor in China’s ride-hailing leader, would count Didi’s IPO as another victory, after profiting from a number of other high-value market debuts including Coupang and DoorDash.
The company is also said to be expanding its business by pushing into European markets. Bloomberg reported last month it could roll out its ride-hailing service in the UK, France, and Germany by the first half of 2021.
Didi didn’t immediately respond to Insider’s request for comment.