China's ride-hailing company Didi Chuxing has been reportedly required by the Chinese government to delist from the New York Stock Exchange due to the potential leakage of sensitive data, according to a report from Bloomberg.
The report said the Cyberspace Administration of China had directed Didi Chuxing to work out plans and details to quit the US stock market, subject to government approval. It was reported that options include a straight-up privatisation or a listing in Hong Kong. If the company chooses privatisation, the proposal will likely be at least the same as IPO price in June as a lower offer could prompt lawsuits or shareholder resistance.
On the other hand, if Didi Chuxing chooses to have a secondary listing in Hong Kong, the IPO price would probably be lower than the share price in the US. However, there is no final decision yet and the Chinese authorities might backtrack on their request.
The report said a state-directed privatisation would be unprecedented for a large private firm in China, adding that the punishment against Didi Chuxing is particularly harsh compared to Alibaba and Tencent, as Didi Chuxing's IPO decision was deemed by the government as a challenge to Beijing.
Didi Chuxing had its IPO on 30 June in the US but soon after this the Chinese government asked it to remove from app stores due to serious violations on Didi Global's collection and usage of personal information. Multiple reports said the Cyberspace Administration of China announced the ban after the IPO, just two days after the regulator said it was starting a cybersecurity review of the company. The authority said that it had ordered Didi Chuxing to rectify its problems following legal requirements and national standards, and take steps to protect the personal information of its users. The CAC did not specify what it would look into, but the time of announcement came after Didi Chuxing's IPO and on 30 June and the Communist Party’s 100th anniversary celebrations in Beijing.
Moreover, in July, it was reported that the Chinese government is considering handing Didi Chuxing serious penalties after its initial public offering (IPO) in the US last month, while the authority is reportedly weighing a range of potential punishments already, according to a report from Reuters.
Reuters reported that Didi Chuxing's decision to launch its IPO in the US market despite pushback from the Cyberspace Administration of China (CAC) was viewed as a challenge to Beijing's authority, the report quoted sources from Bloomberg. Regulators in China are considering a range of potential punishments, including a fine, which is likely bigger than Alibaba's record of US$2.8 billion earlier this year, suspension of certain operations, introduction of a state-owned investor for Didi Chuxing, and even delisting or withdrawal of Didi’s US shares.
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