China’s cyberspace regulator ordered app stores to remove Didi Chuxing, which dealt a heavy blow to a ride-hailing giant that launched one of the largest US public offerings in the last decade just days ago.
The Cyberspace Administration of China announced the ban on Sunday, citing serious violations of the collection and use of personal data by Didi Global Inc. without elaborating on it. This unusually quick decision came two days after regulators announced they were initiating a cybersecurity review of the company.
This effectively requires that the largest app stores in China, operated by Apple Inc. and smartphone manufacturers Huawei Technologies Co. and Xiaomi Corp. operated, delete Didi from their offers. But the current half a billion users can still order rides and other services as long as they have downloaded the app before ordering on Sunday.
The surprising investigation and the quick decision by China’s powerful Internet regulator challenge Didi with regard to issues such as antitrust law and data security. The company has dealt with a wide-ranging antitrust investigation of Chinese internet firms with uncertain outcomes for Didi and colleagues such as major financier Tencent Holdings Ltd. It lost up to 11% of its market value on Friday after the watchdog made its determination.
More broadly, Beijing has curbed the growing influence of China’s largest internet conglomerates and stepped up efforts to streamline the ownership and handling of information assets, the online powerhouses of Alibaba Group Holding Ltd. up to Tencent and Didi daily from hundreds of millions of users. The regulatory authority instructed Didi on Sunday to fix its problems in accordance with legal requirements and national standards and to take measures to protect the personal data of its users.
On Sunday, the company announced on its official social media account that it had already stopped registering new users on July 3 and was now working on correcting its app in accordance with regulatory requirements. Didi’s initial public offering was led by Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co. In total, the transportation company appointed 20 consultants to manage the float.
The CAC did not specify on Friday what it will investigate. But the timing of his announcements was significant, as it followed not only Didi’s IPO but also the celebration of the 100th anniversary of the Communist Party in Beijing.
Didi, one of the largest single investments in SoftBank Group Corp.’s portfolio, defeated Uber Technologies Inc. in China in 2016 before embarking on an ambitious international expansion. It began trading in New York on Wednesday after an initial public offering of $ 4.4 billion, making it the biggest debut by a Chinese company in the United States after Alibaba.
Didi, however, had to be satisfied with an IPO at a far lower market value than previously aimed at. It debuted at about $ 67 billion, just above its last round of funding in 2019 and way below the most optimistic $ 100 billion expectations – a reflection of the regulatory scrutiny that has followed it since two murders in 2018 carried out by the founder Cheng Wei called his “darkest days”.
The Beijing-based company responded to the subsequent raid with a number of efforts to improve security on its network. The company began exploring new lines of business to offset the slower growth in driving services, from car repairs to grocery deliveries. That served him well during the coronavirus pandemic when entire cities came to a standstill. The company posted $ 837 million in profits for the March quarter – a rarity among recent high profile IPOs like Kuaishou Technology.
The latest move against Didi underscores the uncertainty surrounding the Chinese government’s action against the internet sector. Earlier this year, the state market regulator announced that it was investigating alleged abuses – including enforced exclusivity agreements for traders – in Meituan, also days after China’s third largest internet company raised $ 9.98 billion through record placement of stocks and convertible bond sales .
“This is deeply unfair to investors,” said Brock Silvers, chief investment officer of Hong Kong-based private equity firm Kaiyuan Capital, on Friday. “And as a crucial issue of market integrity, China’s regulators should stop allowing companies to list during the investigation.”
– With the support of Coco Liu, Jessica Sui and Anand Krishnamoorthy
(Updates on Didi’s statement from the fifth paragraph)
Before it’s here, it’s at the Bloomberg Terminal.
LEARN MORE
Comments are closed.