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This Friday (December 3), Chinese online ride-hailing giant Didi Chuxing announced that it will delist from the United States and will be listed on the Hong Kong Stock Exchange.
After the news was announced, the share price of Didi’s major shareholder SoftBank Group fell more than 2%; Chinese concept stocks and Hong Kong stocks also fell sharply, Alibaba fell 5.4% and hit a new low for listing, and Bilibili fell more than 7%.
Didi Chuxing went public in the U.S. at the end of June this year. After 48 hours of listing, Chinese regulators announced the implementation of a cyber security review. Since then, the Chinese government’s supervision of Didi has continued to increase, until it finally announced the end of its more than five months of listing in the United States.
Didi is the epitome of the entire group of Chinese concept stock companies. Under the influence of a series of policies such as “anti-monopoly”, “enhanced data security”, and “double reduction”, the performance of Chinese concept stocks listed in the United States has continued to decline. In addition, the US Securities Regulatory Commission has also put forward more and more restrictions on Chinese concept stocks, and the future of Chinese concept stock companies is full of uncertainties.
General trend
Analysts believe that Didi’s return to Hong Kong stocks shows the regulator’s attitude towards the listing of technology companies, which is instructive for other companies’ listing destinations.
“This incident has convinced the market that the current mainland China’s industry supervision of technology stocks will continue, and the decline in the stock prices of technology stocks listed in Hong Kong today also reflects this factor.” ) Believes that Didi’s plans to delist in the United States and go public on the Hong Kong stock market will have a significant impact on the site selection decisions of large technology stocks in the future.
Zheng Lei, chief economist of Baoxin Financial, told Reuters that China’s stock market (including A-shares and Hong Kong stocks) is becoming more and more attractive, and due to the security of key strategic resources and regulatory considerations, it is listed overseas. The return of leading companies such as the Internet to listing in China is a general trend.
“Some companies have completed their secondary listings in Hong Kong, and some may consider returning to A-share listings in the future.” Zheng Lei said.
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Regulatory pressure is not only coming from China, the US Securities Regulatory Commission is also putting pressure on it.
The U.S. Securities and Exchange Commission (SEC) said on Thursday that Chinese companies listed on the U.S. stock exchange must disclose whether they are owned or controlled by government entities and provide audit inspection evidence. This regulation promotes a process that may result in more than 200 companies being kicked out of US exchanges.
It is undeniable that Chinese concept stocks that face regulatory risks from both China and the United States may reduce the attractiveness of some Chinese companies to investors.
Hillhouse, one of China’s most well-known asset management institutions, has just released its latest US stock holdings report, which shows that Hillhouse cleared its online ride-hailing giants Didi Chuxing, NetEase and New Oriental in the third quarter.
Low-key listing, strong supervision
Didi Chuxing went public in the United States in a low-key manner at the end of June this year, which immediately triggered a series of regulatory shocks. More than 20 apps including Didi were required to be removed from the shelves. Subsequently, the China Cyberspace Administration of China joined forces with the Ministry of Public Security, Ministry of National Security, Ministry of Natural Resources, Ministry of Transport, State Administration of Taxation, State Administration of Market Supervision and other departments to enter Didi Travel to carry out Cyber security review.
“This matter of Didi feels both reasonable and unexpected.” An investor from Shenzhen and Hong Kong previously analyzed to BBC Chinese that Didi’s online car-hailing business is already the largest in China. He has already won on this track, and when it comes to harvest, Didi has been unprofitable and has encountered the epidemic again, and the story is almost impossible to tell.
“However, after the epidemic has ushered in a rebound, revenue has become more attractive, coupled with the good market in the U.S. stock market, ushering in a good time to go public, coupled with the fact that there are too many investors behind Didi, and it is a gambling agreement and another It’s a convertible preferred stock, maybe it really can’t be dragged on before going public. So it’s reasonable to say it.”
Convertible preferred stock refers to the fact that some holders of preferred stock may convert their equity into debt under the circumstances of the company’s poor management. If the company cannot be listed and cannot make a profit, it may suddenly face a large amount of debt because of this setting.
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Following the network security review and app removal, Didi’s 25 apps were required to be removed from the shelves.
The above-mentioned investors said, “Unexpectedly, they did not expect that their scalp is so hard”-now looking back, the regulator seems to have said hello that they want to go public, but first do domestic compliance, because these years According to the regulations of the online car-hailing industry that have been promulgated one after another, Didi has not been able to fully comply with the regulations, and Didi’s map surveying and mapping license level is very high. Whether the audit papers should be given to the PCAOB (Accounting Oversight Board of Public Companies of the United States) may have to be first. Negotiations, “Otherwise, it will be troublesome if you get caught by the United States like TikTok.”
Anbang think tank said in an analysis email sent to BBC Chinese that the so-called “data security” is not the core of the problem. Didi also explained that the data center is in China and the core reason is still geopolitics. After the game in recent years, Sino-US relations have gradually entered the stage of geopolitical games among major powers, and “national interest” has begun to become an important issue in the relations between the two countries.
“From this perspective, whether Didi is listed or not, and where it is listed, is now given the color of’national interest’, which is related to the competition between China and the United States. The Cyberspace Administration of China has issued successive rectification requests, showing a possibility-domestic The core circle does not want to rely on the United States. If this view is established, all investment cases that involve important fields and are significantly dependent on the U.S. capital market and technology will not receive obvious blessings.” Anbang think tank analysis.
“The investigation of Didi is an event of great significance, marking the end of the brutal growth of Chinese Internet companies.” Liao Ming, founding partner of PAC (Prospect Avenue Capital), said that in the past 20 years, the Chinese government has tended to increase efficiency and growth. It is not fair, and has adopted a relatively laissez-faire approach to the legal compliance issues of technology companies. Companies like Didi are too big to solve. No one knows what will happen next.