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Prominent Chinese transportation platform Didi will suspend its Hong Kong IPO listing as it fails to satisfy Chinese internet watchdog.
Chinese ride-hailing firm Didi Global Inc (NYSE: DIDI) is suspending preparations for its Hong Kong listing over a cybersecurity probe. According to a recent report, Didi failed to satisfy Chinese regulators’ demand to improve its systems for handling sensitive user data.
The Cyberspace Administration of China (CAC), China’s top internet watchdog, informed Didi that its proposals to prevent security and data leakage were insufficient. As a result, the ride-hailing platform’s main app – removed from local app stores in 2021 following its aborted New York initiative – remain suspended. The suspension has raised concerns about how Didi can rectify this problem to appease the watchdog. In addition, there are concerns about possible punitive measures the CAC might level against the company.
Didi’s planned Hong Kong IPO initially slated for a summer institutionalization has taken a back seat. The popular vehicle-for-hire platform is also working towards finalizing its fourth-quarter results – a prerequisite for a listing prospectus.
Didi’s Hong Kong IPO Came About after Its Aborted New York Listing
Once touted as the Chinese Uber, Didi has suffered a series of time-consuming bureaucratic procedures since an initial New York listing last June. However, after data handling concerns in Beijing, Didi resorted to pulling out of New York. The firm was one of several targets in a sweeping tech sector crackdown by the Chinese government at the time.
Didi suffered a massive Q3 $4.7 billion loss as a result of sunken revenues from the September quarter. The loss, which happened largely because of Chinese regulatory crackdown, could worsen as the suspension takes effect. In addition, the ride-hailing giant’s IPO shares are currently changing hands about 76% less than their original price.
Just months after its high-profile ($4.4 billion) public listing in America, Didi announced that it would delist there and instead list in Hong Kong. Last month, reports stated that the ride-hailing giant intended to reduce its overall headcount by 20% before the US delisting. Furthermore, reports stated that the job cuts resulting from the transfer of stock to Hong Kong would likely affect most of Didi’s businesses.
However, owing to the recent development with the Cyberspace Administration of China, the Hong Kong reprieve now seems jeopardized. The Chinese central internet regulatory agency could also make the outcome of the Didi probe public sooner or later.
Didi’s Hong Kong debut is the first of many Chinese internet companies expected to list close to home. However, the latest suspension raises even more doubt and uncertainty over Beijing’s domestic intentions for the internet and tech space. This concern becomes heightened considering the fact that the Chinese government has since tightened rules regarding foreign listings.
Didi is currently the most dominant player in the Chinese ride-hailing sector, after wresting control from Uber back in 2016. The Beijing-based company claims to have over 500 million users and more than 15 million drivers.