Didi Stock Down 7% Now following Security Review Announcement

UTC by Mercy Tukiya Mutanya · 3 min read
Didi Stock Down 7% Now following Security Review Announcement
Jean Liu, President of DiDi. Photo: World Economic Forum / Flickr

In its IPO prospectus, Didi revealed that it had met with regulators and could be subject to penalties should regulators not be impressed by the inspection.

The stock of the Chinese ride-hailing app Didi Global Inc (NYSE: DIDI) fell 9% in pre-market trading Friday after it was announced that the company was up for cybersecurity review. The announcement came from the Office of the Central Cyberspace Affairs Commission. According to the July 2 announcement, new users will not be able to register for the service for the duration of the review. 

A translation of the part of the announcement reads: 

“In order to prevent national data security risks, maintain national security, and protect the public interest, in accordance with the National Security Law of the People’s Republic of China and the Cybersecurity Law of the People’s Republic […] In order to cooperate with the network security review work and prevent risks from expanding, “Didi Travel” stopped new user registration during the review period.”

This news comes just two days after Didi Chuxing’s New York Stock Exchange IPO. Shares debuted at $16.65 each after pricing at $14 per share. They went on to soar by as much as 28% during the day only to close at $14.14. The stock performed better on Thursday, closing up 15.98% bringing Didi’s market capitalisation close to $79B. Shares were up 5% in pre-market trading only to fall 9% after the announcement.  Now the stock is 6.7% down, trading at $15.30.

Didi intends to “fully cooperate” for the duration of the review. 

“We plan to conduct comprehensive examination of cybersecurity risks, and continuously improve on our cybersecurity systems and technology capacities,” CNBC quotes a company spokesperson.

Founded in 2012, the company has over 490 million riders per year and an estimated 41 million transactions daily. It is currently operational in 14 other countries. Outside ride-hailing services, the company is looking into developing autonomous taxis.

The NYSE listing comes on the heel of an increase in demand for ride-sharing services. Demand has shot back up with ongoing inoculation programs and the reduction in Covid-19 cases.  

The extra scrutiny comes as no surprise given recent happenings. China seems to be cracking down on local tech companies.  In June Didi was under probe for anti-trust offenses. Regulators were also reported to be looking scrutinizing the firm’s pricing model. 

Last year, Ant Group’s Shanghai and Hong Kong IPO was impeded when regulators summoned executives Jack Ma, Eric Jing and Simon Hu. E-commerce giant Alibaba Group Holding Ltd was in April fined $2.8B by regulators for alleged anti-monopoly violations. 

In its IPO prospectus, Didi revealed that it had met with regulators and could be subject to penalties should regulators not be impressed by the inspection.

“We cannot assure you that the regulatory authorities will be satisfied with our self-inspection results or that we will not be subject to any penalty with respect to any violations of anti-monopoly, anti-unfair competition, pricing, advertisement, privacy protection, food safety, product quality, tax and other related laws and regulations. We expect that these areas will receive greater and continued attention and scrutiny from regulators and the general public going forward,” stated the team.

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