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The SEC deciding to probe the Didi IPO is another regulatory problem for the company, added to cybersecurity investigations back in China.
Didi (NYSE: DIDI) stated in its annual report that it is under investigation conducted by the Securities and Exchange Commission (SEC) for its IPO. According to the Chinese ride-hailing giant, the SEC contacted the company for “inquiries in relation to the offering” shortly after Didi went public last year. In addition, around that same period, the Beijing-based company also faced a cybersecurity probe from Chinese regulators.
Concerning the SEC investigation on its tarnished $4 billion IPO, Didi’s attached statement in its annual report read:
“We are cooperating with the investigation, subject to strict compliance with applicable PRC laws and regulations. We cannot predict the timing, outcome or consequences of such an investigation.”
Didi Declined to Give Further Details on SEC IPO Investigation
However, as it stands, Didi is yet to provide further insight into the SEC probe. Furthermore, shares of the prominent vehicle-for-hire platform dipped 5% in premarket trading.
Back in June last year, Didi launched a much-anticipated $4.4 billion initial public offering on the New York Stock Exchange (NYSE). This represented the largest US share offering by a Chinese firm since Alibaba’s blockbuster debut back in 2014. Following the IPO, Didi’s shares initially spiked by 28.6%, bringing its market cap to a lofty $80 billion. However, Didi stock eventually closed fractionally higher than the $14 IPO price, with a market cap of about $67.8 billion.
Since its North American IPO, Didi’s stock is now trading around 85% lower.
Chinese Regulatory Probe on Didi Cybersecurity
Days after Didi’s IPO, the Chinese government banned the ride-hailing giant from app stores across the country. In addition, the same Beijing regulators also launched a cybersecurity investigation and review of Didi’s affairs. According to the highly-influential Cyberspace Administration of China, Didi breached privacy laws and posed several cybersecurity risks. Furthermore, the cybersecurity allegations levied against Didi were also widely viewed as punitive measures. Analysts believed Beijing did this simply because Didi decided to list overseas instead of in China. However, since that time, Didi has since stated that it plans to delist from the NYSE and instead look towards a listing in Hong Kong.
The implication of the cybersecurity probe is that new users would become unable to register for Didi’s ride-hailing service during the review. At the time it first became clear that domestic regulators would be investigating Didi’s cyber footprint, the ride-hailing giant issued a statement that read:
“We plan to conduct comprehensive examination of cybersecurity risks, and continuously improve on our cybersecurity systems and technology capacities.”
Chinese-owned Stocks in the US
Since the drama surrounding Didi, US regulators have adopted a more cautious approach towards Chinese IPOs. For instance, last July, the SEC instructed staff to get more information from Chinese companies looking listing in the US. According to the US regulator, this would be a prerequisite to greenlighting any approvals for the sale of said shares in the country.