Chinese ride-hailing giant Didi’s shareholders have voted to delist the company from the NYSE. The decision is a long-expected result of the company finding itself in hot water with the Chinese government after a rushed and later troubled public-market debut in the United States.
Didi went public in the middle of 2021 in an offering that came together quickly. After listing in June, by early July, TechCrunch was already flagging issues between the newly floated company and the Chinese government.
Putatively irked over data concerns, the Chinese Communist Party was executing a regulatory push at the time, making Didi’s foreign IPO all the less palatable. Quickly after the listing, Didi had to stop accepting new user registrations, among other regulatory penalties.
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The company’s subsequent suffering was absorbed by its new investors post-IPO. After listing at $14 per share and trading as high as $18.01, per Yahoo Finance data, Didi’s shares bottomed out recently at $1.37. Today, the company is worth $1.56 per share, up 4% on the news of its impending delisting.
Per filings with the U.S. Securities and Exchange Commission (condensed):
[Didi] today announced that the following resolution, which had been submitted for shareholder approval, has been approved at the extraordinary general meeting of the Company’s shareholders held in Beijing today: as an ordinary resolution, to delist the Company’s American Depositary Shares from the New York Stock Exchange as soon as practicable, and that in order to better cooperate with the cybersecurity review and rectification measures, the Company’s shares will not be listed on any other stock exchange before the Delisting is completed.
The company is expected to list in Hong Kong after it delists from U.S. markets, though when that could occur is not clear.
What’s notable, or perhaps ironic, about the timing of the Didi delisting is that it seems to have caught the worst on both ends. Recall that the scuppered Ant IPO of late 2020 was the unofficial kickoff of a regulatory crackdown by the Chinese Communist Party on its domestic technology market. A wave of changes was announced, from video game restrictions to the abolishment of the for-profit edtech market and more.
But after years of punishment, the Chinese tech market is shedding staff and value as its ruling government seeks to smooth the waters somewhat. More simply, Didi went public in the United States quickly after its government began clamping down on the company and its peers and is now delisting just as the Chinese government is seeking to change its tune about its tech economy.
Vice Premier Liu He made noise just last week about “signs of easing [China’s] crackdown on the technology sector which has wiped billions of dollars of value from its most prominent companies,” as CNBC put it. Those came too late for Didi. How will other companies fare?
The startup question
While these comments are good news for Chinese tech companies looking to grow, make a boatload of money and eventually list, the Didi delist is depressing. No amount of new chatter from Communist Party officials will change the fact that the company got its wings more than clipped after it went public in the United States.
Investors, after continuing to pump capital into Chinese startups in 2021, have hit the brakes in the wake of a changed market. After deal volume peaked in Q3 2021 — around when Didi went public, mind — venture deal volume in China fell from 2,380 deals to just 958 in the first quarter of 2022, per CB Insights data.
The value of Chinese venture deals in Q1 2022 was $12.7 billion, hardly a pittance. But that figure was the lowest result since Q2 2021, and far less than the over $26 billion invested in Chinese startups in both Q3 and Q4 of last year.
In short, it appears that while tech companies in China managed to keep raising capital despite the regulatory crackdown, their ability to stay bullish in the face of a changing economy and government posturing has faded.
Now the country has words from a vice premier stacked right against the end of Didi as a listed company. Which do you think will send a bigger signal? Which do you think will more drive sentiment?
Adding to the mix, the Chinese economy is taking a pounding this year due to draconian — nigh Orwellian — levels of lockdown to prevent the spread of COVID-19 in the country. How China expects to fend off a pandemic forever is not clear, but its methods for controlling the coronavirus today are a sort of self-imposed economic crash. It’s a bit like what happened to many leading Chinese tech companies last year, only broader now as all companies in certain areas are caught up in the mess.
Apple is heading for the exit. Local tech bosses are making noise. But none of that came quickly enough for Didi to hang on. Bon voyage, Didi. We barely knew ye.