Reports suggest that China’s largest ride-hailing service DiDi Global will go private to appease investors and domestic authorities amid cybersecurity investigations.
On July 29, 2021, the Wall Street Journal released a report stating that DiDi Global, the largest Chinese ride-hailing giant, is considering going private to appease Chinese authorities. The report noted that they are doing so to repay their investors for losses incurred in June after its overseas IPO debut. On June 30, DiDi raised US$4.4 billion in an IPO in the US. However, right after going public, the Cyberspace Administration of China (CAC) declared a data-related cybersecurity investigation into DiDi, causing DiDi’s shares to crash. Investors and founders of the company lost millions in wealth.
As of now, the app is facing a temporary ban and cannot take on any new users. This comes after DiDi went public in the US despite China advising against it. DiDi has nearly 500 million active users and provides over 10 billion rides a year. Beijing’s authorities expressed concerns about the company mishandling and sharing its users’ data. A regulator told Reuters that the app has “serious violations of laws and regulations pertaining to the collection of personal information.” Besides security concerns, the app also came under fire for lacking transparency. Reports found that DiDi abused its algorithms to unevenly divide the money from a passenger’s bill, leaving drivers with a small amount. In keeping with that, the app has released a new feature providing drivers with a detailed breakdown of their income.
DiDi’s shares are down by nearly 30% since the investigation. In light of this, the WSJ report suggested that the company will go private. However, in a social media statement, the company responded to the report denying the claim. The statement said, “The company affirms that the above information is not true. The company is fully cooperating with the relevant government authorities in China in the cybersecurity review of the company.”
After the WSJ report, the company’s shares rose by nearly 50%. However, since it declared that the report wasn’t accurate, Didi’s shares fell by a third.
Currently, the company is focusing on pacifying its domestic authorities. As per reports, DiDi is planning on collaborating with Westone Information Industry Inc., the state-owned information security firm, to monitor and manage its data. Westone is the designated authority to prevent data breaches in companies.
Despite the antitrust claims and temporary bans, retail investors in the US are still investing in DiDi. A strategist from JP Morgan noted, “Retail investors appear to have behaved in a contrarian fashion by seeing [the] dip in Chinese stocks as [a] buying opportunity.” They have become dip-buyers who buy a stock when its price is low so that they can profit when the market rebounds. It is risky, and according to retail investors, worth it. Analysts feel that DiDi’s shared mobility business model makes it appear as a lucrative investment for the future.
Despite the many speculations, whether DiDi goes private or remains public is yet to be confirmed.
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