Shares of tech titan Didi Chuxing tumbled more than 20% on Tuesday after Chinese regulators ordered its app removed from the app store while it conducts a cybersecurity review of the company.
Didi is in the rideshare business operating e-taxis, comparable to the US versions of Uber and Lyft.
The company’s share price fell to $ 11.58 on Tuesday morning, down 25% from $ 15.53 at the last market close. Markets were closed on Monday for the holiday, so traders delayed until Tuesday to react to the news by selling or buying.
The development comes less than a week after Didi was listed on the New York Stock Exchange. Chinese government officials reportedly advised Didi to drop its U.S. listing and re-examine its network security many weeks before its initial public offering, the Wall street journal reported Monday.
On Didi’s decision to go public in light of China’s intervention, Kendra Schaefer, a partner at Beijing-based strategic advisory consultancy Trivium China, said on CNBC’s Squawk Box Europe on Tuesday that Didi “definitely I should have considered withdrawing the IPO. “
He said that Chinese financial regulators may not have given Didi “a clear directive”, noting that “it is absolutely possible that Didi was not really sure which way to go and in the face of pressure from investors, they decided to do it.” .
After years of applying a relatively laissez-faire approach, China is taking a much tougher line against the tech sector and has signaled that it will expand oversight of high-tech companies. In addition to the Didi investigation, China is also conducting cybersecurity investigations of US-listed Boss Zhipin and subsidiaries of the Full Truck Alliance.
In June, it was revealed that Chinese regulators were also checking Didi for antitrust violations, Reuters reported.
In its IPO prospectus, which discloses risks, opportunities and financial details before selling shares to the public, Didi pointed to the possibility that regulators could take punitive action against the company.
“We cannot assure you that regulatory authorities will be satisfied with the results of our self-inspection or that we will not be subject to any penalties with respect to any violation of antitrust, anti-unfair competition, pricing, advertising, privacy protection, food safety , product quality, taxes and other related laws and regulations. We expect these areas to receive more and continued attention and scrutiny from regulators and the general public in the future, “Didi noted in its prospectus.
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