Didi Global Faces Pressure From Chinese Regulators To Delist From NYSE Over Data Leakage Fears

by Bhaswati Guha Majumder - Nov 27, 2021 03:20 PM +05:30 IST
Didi Global Faces Pressure From Chinese Regulators To Delist From NYSE Over Data Leakage FearsDidi, China's ride hailing app.
Snapshot
  • People with knowledge about the matter said that proposals under consideration include straight-up privatisation or a share launch in Hong Kong followed by delisting from the United States.

Chinese regulators have ordered Didi Global's top executives to design a plan to delist from the United States exchanges, revealed some people familiar with the matter — an extraordinary request that is certain to reignite anxieties about Beijing's ambitions for its colossal tech industry.

China’s tech watchdog, Cyberspace Administration of China (CAC) wants management to take the firm off the New York Stock Exchange due to concerns about sensitive data leaking, said one of the people, according to a report by Reuters.

The agency, which is responsible for data security in the country, also wants the ride-hailing behemoth to commit to resolving the delisting issue within a specific time frame and it has given Didi instructions to sort out the finer points, subject to government clearance.

People with knowledge about the matter said that proposals under consideration include straight-up privatisation or a share launch in Hong Kong followed by delisting from the United States.

As per people familiar with the matter, if the privatisation process goes through, the offer will almost certainly be at least the $14 IPO price, because a lower offer so soon after the June IPO might result in lawsuits or shareholder pushback.

It was also claimed that Didi will have to solve the data security vulnerabilities that have received regulatory scrutiny if it moves its IPO to Hong Kong.

The corporation may be forced to hand over custody of its data to a third party, further reducing its cost.

The sources said that according to the internet regulator, Didi's ride-hailing and other apps will be relaunched in China only if the business agrees to delist from New York.

The CAC ordered app stores to remove Didi-operated mobile apps in July, just days after the business went public in New York. It also urged the company to halt the registration of new users, citing national security and public interest as justifications.

Earlier this month, it was reported that Didi was planning to relaunch its apps in China by the end of the year in the hopes that Beijing's cybersecurity investigation into the firm will be completed by then.

However, on 26 November, Bloomberg first reported on Chinese regulators' proposal for Didi to be delisted. Following the revelation, shares of Didi investors SoftBank Group Corp and Tencent Holdings plunged more than 5 per cent and 3.1 per cent, respectively.

According to a June filing by Didi, SoftBank Vision Fund owns 21.5 per cent of the company, followed by Uber Technologies Inc with 12.8 per cent and Tencent with 6.8 per cent.

Sources told Reuters that despite the regulator's advice to put its New York listing on hold while a cybersecurity examination of its data procedures was performed, Didi ran afoul of Chinese regulators.

The ride-hailing company was promptly investigated by the CAC for its gathering and use of personal data. It claimed that data had been gathered illegally. At that time Didi responded by stating that it had halted accepting new customers and that it would make improvements to comply with national security and personal data usage requirements, as well as to protect users' rights.

As the Chinese Communist Party government strives to reign in China's internet giants' supremacy after years of unbridled growth, the authorities are closely scrutinising their anti-monopolistic activities and the handling of their huge consumer data.

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