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Didi’s Ride-Hailing Apps Blocked Days After US IPO

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DiDi Global Inc. (滴滴出行) (NYSE: DIDIY) was a mobile transportation platform that monopolized the Chinese ride-hailing and taxi-hailing market having a user base of 550 million worldwide.

On 16 June 2021, China's State Administration for Market Regulation (SAMR) launched an investigation of DiDi for unfair competitive practices and controlling pricing. DiDi’s prospectus disclosed this but did not fully disclose the warning from the Cyberspace Administration of China (CAC) to postpone the listing for cybersecurity review and the risk involved from this noncompliance with information security.

DiDi was listed on the NYSE on 30 June 2021, raising around USD4.4bn. Within nine days after the listing, CAC had banned all of DiDi's 25 ride-hailing apps from app stores over the mishandling of customer data and to safeguard national security. This led to a significant drop in DiDi's share price.

On 16 July 2021, seven Chinese government departments, including those responsible for national security and cybersecurity, visited DiDi's office. Reports suggested that heavy fines, suspension of operations, and even delisting.

As the largest shareholder with a 20.1% stake, how would the Chief Investment Officer of SoftBank's Vision Fund recommend to decrease risk exposure of its investment in DiDi?

Learning Objective:

  1. Understand how lack of corporate governance and undermined risk management can affect its operations and profits, and valuation.
  2. Learn the impact on Chinese companies resulting from noncompliance with government regulations and policies.
  3. Understand Chinese government’s practice in cybersecurity and to break up monopolization and anti-competition practices of tech companies.
  4. Understand controversies that Chinese companies listing in the US faced, especially holding massive personal data.

Year of Publication: 2024
Ref. No.: 24/784C
Discipline: Accounting & Control, Environmental, Social, and Governance (ESG), Finance & Investments
Industry: Software & Services, Transportation
Country: China (People's Rep. of), Global
Company: DiDi Global Inc.
Languages: English
Pages of Text: 11