Didi shares tank as merchants react to China’s crackdown

The shares of ride-hailing giant Didi Chuxing plunged up to 25% in pre-market trading on Tuesday, less than a week after the Chinese app was listed on the New York Stock Exchange.

The company’s share price fell to $ 12.06 in early trading on Tuesday at 4:46 a.m., down from $ 15.53 at the last close of the market.

Fall comes after China announced late Friday that new users in the country will not be able to download the app while it is conducting a cybersecurity review of the company.

Traders who were unable to buy or sell the stock on Monday because the markets were closed responded to the news on Tuesday. Shares of other Chinese stocks listed on the U.S. stock exchanges also fell, with Baidu down about 3%, JD down about 2% and Alibaba down nearly 1%.

Didi was listed on the NYSE last Wednesday with a market capitalization of around $ 68 billion. The company’s stock rose nearly 16% on Thursday and fell a little more than 5% on Friday.

Didi’s pre-IPO price slide on Tuesday came after the Wall Street Journal reported Monday, citing people familiar with the matter, that Didi was advised by Chinese regulators to postpone its US listing and network security several weeks before Review IPO.

Didi did not immediately respond to a CNBC request for comment.

Kendra Schaefer, partner at Beijing-based strategic consultancy Trivium China, told CNBC’s Squawk Box Europe on Tuesday that Didi “should definitely have considered going public.

She added that companies like Didi have huge government relations departments that are in regular contact with regulators.

Regulators may not have given Didi a “clear instruction,” she said, adding that “it’s entirely possible Didi wasn’t really sure which direction to jump in and, given investor pressure, decided to just go ahead to attempt.”

After years of relatively little regulation, China is starting to crack down on its tech titans. Following the announcement of their Didi investigation, Chinese regulators also opened cybersecurity reviews of US-listed Boss Zhipin and subsidiaries of the Full Truck Alliance.

In June, Reuters reported that Chinese regulators are investigating Didi for antitrust violations. Beijing is also reportedly investigating the company’s pricing mechanism.

Didi warned in its IPO prospectus that it could be punished by dissatisfied regulators.

“We cannot assure you that regulators are satisfied with our self-regulatory results or that we will respond to antimonopoly, unfair competition, pricing, advertising, privacy, food safety, product quality, tax and other related laws and regulations. We expect these areas to be monitored and examined more closely and continuously by regulators and the public in the future, “said the company in its prospectus.

Didi was founded in 2012 and claims to have 493 million active drivers per year and 41 million average daily transactions. It started international expansion in 2018 and now operates in 14 countries outside of China.

In addition to traditional ride-hailing, Didi invests heavily in the implementation of autonomous taxis and operates several segments related to mobility.

– Additional coverage from Steve Kovach and Jessica Bursztynsky.

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