China's ride-hailing giant Didi moves to delist from US, plans Hong Kong IPO

Didi is aiming to file for the Hong Kong listing around March. PHOTO: REUTERS

HONG KONG (BLOOMBERG) - Didi Global has begun preparations to withdraw from United States stock exchanges and will start work on a Hong Kong share sale, a stunning reversal as it yields to demands from Chinese regulators that had opposed its American listing.

The ride-hailing giant's board has authorised the company to file for a delisting of its American depositary shares from the New York Stock Exchange (NYSE) and will pursue a listing in Hong Kong, it said in a statement on Thursday (Dec 2). It will ensure that the US stock will be convertible into freely tradable shares on another internationally recognised stock exchange, according to the statement.

Didi is aiming to file for the Hong Kong listing around March, sources with knowledge of the matter said, asking not to be identified as the plans have not been made public. The company did not immediately respond to a request for comment.

The unprecedented move underscores the depth of Beijing's concern about the potential leakage of sensitive data to its geopolitical rival, as well as the extent to which the government will go to punish Didi for contravening its wishes. Chinese regulators had asked Didi's top executives to devise a plan to delist from US bourses because of concerns about leakage of sensitive data, Bloomberg reported last week.

Didi sparked the ire of Beijing when it proceeded with its New York stock offering this summer, despite regulatory requests that it ensure the security of its data before the initial public offering (IPO). Regulators placed the company under a cyber-security review days after its debut, removed its services from domestic app stores and has since asked Didi to work on plans for a withdrawal from the NYSE.

Didi shares were little changed at US$7.80 on Thursday, having tumbled nearly 45 per cent from their IPO price. Executives had considered proposals including a straight-up privatisation or a share float in Hong Kong followed by a delisting from the US, sources told Bloomberg.

If the privatisation proceeds, the proposal will likely be at least the US$14 IPO price since a lower offer so soon after the June IPO could prompt lawsuits or shareholder resistance, the sources said. If there is a secondary listing in Hong Kong, the IPO price would probably be a discount to the share price in the US

Didi's decision follows mounting pressure from both Washington and Beijing on the universe of Chinese companies listed in the US, from its biggest tech giants to old-economy stalwarts like PetroChina. The US government is inching further on efforts to boot Chinese companies off American stock exchanges for not complying with Washington's disclosure requirements. At the same time, Beijing is said to be drafting regulations to effectively ban companies from going public on foreign stock markets through variable interest entities, according to sources, closing a loophole long used by the country's technology industry to raise capital from overseas investors.

The Securities and Exchange Commission on Thursday announced its final plan for putting in place a new law that mandates foreign companies open their books to US scrutiny or risk being kicked off the NYSE and Nasdaq within three years. China and Hong Kong are the only two jurisdictions that refuse to allow the inspections despite Washington requiring them since 2002.

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