Didi investors to vote on NY delisting after Beijing crackdown

HONG KONG • Didi Global was widely expected to secure a blessing from shareholders yesterday to delist in New York, capping an 11-month ordeal that wiped out about US$60 billion (S$83 billion) of its market value and turned the ride-hailing giant into a symbol of China's tech crackdown.

The Internet firm's biggest backers, including SoftBank Group, Tencent Holdings and Uber Technologies, were expected to vote in favour of a delisting at an extraordinary general meeting in Beijing, according to market observers. This would clear the way for the company to cooperate with regulators that are demanding an overhaul of its data systems as part of a cyber-security review. Only then will Didi be free to begin preparing for a Hong Kong share float, the best outcome investors say they can hope for.

The retreat is part of what many see as comeuppance for a company known for pushing the limits with the Beijing authorities.

Following years of rapid growth, Didi forged ahead with an initial public offering (IPO) in June 2021 despite regulatory opposition. Days after the US$4.4 billion IPO, the country's Internet overseer forced it off China's app stores and initiated a sweeping cyber-security probe into the company, amid concerns of data leaks to a foreign power. The debut was so controversial it triggered an onslaught of regulatory actions constraining Chinese firms from raising capital overseas.

SoftBank and other major backers are likely to back Didi's delisting from the New York Stock Exchange in the hope that this will appease Beijing, securing chances of a comeback including an eventual listing in Hong Kong. SoftBank officials were not immediately available for comment.

Mr Shen Meng, director of Beijing-based boutique investment bank Chanson & Co, said investors have little choice but to accept the delisting, but will closely track Didi's fate to see if they can still trust the Chinese market. It is still unclear what actual punishment awaits Didi, which has been in talks with the Cyberspace Administration of China about a fine and other penalties.

"Didi's proposed delisting, if realised, will certainly deal a serious blow to investors' confidence on Chinese stocks," he said. "Having said that, if the delisted companies could be 'reborn' in Hong Kong with good valuation and liquidity, market concerns over Chinese investment will likely fade away in no time. After all, investors don't care whether a company is listed in Hong Kong or the United States, as long as they can get a good return on investment."

Didi's shareholders, which also include the likes of Fidelity Investments and Blackrock, have so far avoided commenting on the delisting.

The company, valued at around US$80 billion at its IPO, will likely see its stock traded over the counter on the so-called pink-sheets market, home to penny stocks and other riskier businesses.

Some investors could be forced to sell because their mandates do not allow them to hold unlisted shares. Hedge funds have already reduced their Didi holdings by 29 per cent to about US$231.9 million during the first quarter, according to a Bloomberg analysis of filings.

Yesterday's vote will be carried out on a basis of one vote a share. Didi's management, SoftBank, Uber and Tencent together hold about 48 per cent of the firm's equity ownership, said its annual report. Didi said in a May filing it requires a simple majority to set the delisting in motion, and it may postpone the meeting if shareholders push back.

BLOOMBERG