Uber misplaced $2 billion in Didi stake this week on China crackdown menace

Uber CEO Dara Khosrowshahi speaks at a product launch event in San Francisco, California on September 26, 2019.

Philip Pacheco | AFP via Getty Images

Uber’s $ 9.4 billion one-time stake in Chinese ridesharing giant Didi has shrunk by half in less than a month as China escalates threats against US-listed companies. More than $ 2 billion of the decline came this week.

Didi’s American Depositary Shares, which debuted on the New York Stock Exchange in June at $ 14 apiece, fell 21% to $ 8.02 on Friday after falling 11% the day before. They hit a closing high of $ 16.40 on July 1, the second day of trading.

Uber owns about 12% of Didi, making it the second largest investor behind SoftBank. Uber received its stake in 2016 after selling its Chinese business to Didi in exchange for stake in its competitor.

Didi’s IPO came with a lot of hype and a market cap of nearly $ 70 billion. The honeymoon was short-lived, however, as separate reports came to light within days of the offering that Chinese officials were conducting a cybersecurity review of the company and that Didi was advised to postpone its listing and review its network security weeks before going public.

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The news worsened this week after Bloomberg reported that Chinese regulators are planning penalties on Didi, including a fine that could exceed the record $ 2.8 billion paid by Alibaba earlier this year after an antimonopoly investigation. Didi didn’t respond to requests for comment on the Bloomberg report earlier this week.

Penalties could include delisting or withdrawing US stocks, Bloomberg reported, citing people familiar with the matter. Chinese lawmakers recently announced plans to restrict domestic companies from being listed abroad.

While Uber can still show a profit on its initial investment in Didi, which was valued at around $ 2 billion five years ago, it is falling rapidly. In late March, Uber valued the stake in its quarterly filing at $ 5.9 billion. On Friday it fell to $ 4.6 billion.

Uber isn’t the only company hit by Didi’s fall. SoftBank’s stake fell from just under $ 14 billion to below $ 8 billion after its IPO. Tencent, the Chinese internet giant, has seen the value of its Didi inventory drop from about $ 4.3 billion to $ 2.5 billion.

Uber stock held up this week, up 2.3% to $ 47.26.

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