Didi founders lose $2 billion as shares plunge on China’s crackdown

Didi said in the filing that it issued 66.7 million options in the second quarter to an unspecified number of senior leaders. PHOTO: AFP

HONG KONG (BLOOMBERG) - The duo behind Didi Global lost US$1.5 billion (S$2 billion) in wealth in two trading days as the Chinese ride-hailing giant's shares plummeted in New York after Beijing cracked down on the company.

Cheng Wei, co-founder and chief executive officer, saw his net worth drop by about US$1.2 billion, according to the Bloomberg Billionaires Index. Jean Liu, co-founder and president, shed about US$300 million.

Didi's American depositary receipts plunged 24 per cent over the period as China's internet regulator opened a security review and then ordered stores to remove the Didi app. The State Council also issued a sweeping warning to China's biggest companies, vowing to tighten oversight of data security and overseas listings.

The turmoil came just days after Didi, which controls almost the entire ride-hailing industry in China, raised US$4.4 billion in its initial public offering last week. It buffeted global investors and complicated the picture for investing in the country's tech giants.

Chinese regulators asked Didi as early as three months ago to delay its landmark US IPO because of national security concerns involving its huge trove of data, according to people familiar with the matter. Prior to that, China's antitrust watchdog ordered Didi to halt practices including arbitrary price hikes and unfair treatment of drivers.

Didi handed a group of senior executives and board members stock options worth billions of dollars before the IPO, free from the usual four-year vesting restriction and with a strike price Didi described in regulatory filings as "nominal.That means the recipients are able to convert them into normal shares at almost no cost and sell them once the six-month lockup period expires.

Didi is not the first Chinese company trading on a United States exchange to grant options with near-zero strike prices. But the practice is virtually non-existent among large US companies, which typically issue the awards with exercise prices that correspond to the stock price on the day they are granted. Such grants usually vest over at least four years.

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