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Chinese officials reached out to the company to disclose their concerns “about Didi’s data potentially falling into foreign hands”.
The shares of popular Chinese ride-hailing firm Didi Global Inc (NYSE: DIDI) plummeted by 25% after the authorities raised concerns over its handling of customer’s data. Not only that, it has emerged that the Chinese authorities had requested that the company delay its initial public offering in the United States due to “national security concerns.”
Didi Shares Performance
The company, which recently had a debut listing of over $4 billion on the New York Stock Exchange saw its shares drop to around $11 which is way below the price it was selling for earlier, $16.65. Going by this, it means the company would have lost almost $19 billion of its market capitalization. At the time of writing, the stock is at $12.85 (-17.26%).
A report from Reuters said that “the ride-hailing giant’s app was ordered to be removed from mobile app stores in China on Sunday by the Cyberspace Administration of China (CAC) which followed an official investigation into the company’s handling of customer data.”
According to available information, Chinese officials had reached out to the company to disclose their concerns “about Didi’s data potentially falling into foreign hands as a result of the greater public disclosure associated with a U.S. listing.” But despite this, the company went ahead with its US listing plans.
Sumeet Singh, the research director at Aequitas, was quoted to have said that the impact of the fallout has had an adverse effect on the share’s price, before proceeding to add that it was “quite harsh” in his view.
China Continues to Wield the Axe
The latest development by the Chinese government continues a long list of actions taken by the authorities to rein in the country’s internet giant companies. The Asian country had played a role in the collapse of Jack Ma’s Ant Group Co $35 billion IPO and the antitrust investigations that Alibaba and Meituan had recently undergone.
A senior analyst at Eurasia Group, Xiaomeng Lu, said that “This is the first high-profile use of China’s cybersecurity review mechanism. It also raises questions about the firm’s personal data collection practice.” He continued that “the timing of the action right after Didi’s record IPO suggests that Beijing is uncomfortable with large tech companies’ New York listings during a time of escalating tech tension between the two countries.”
Didi, in its defense, has said that the firm did not know it was going to be investigated by the authorities nor did it have prior knowledge that its app would be ordered to be removed. This was the firm’s attempt to convince investors that it had entered the listing in good faith.