After Didi’s IPO, China

After Didi’s IPO, China “stretched” with overseas listed companies

Beijing will strengthen supervision of enterprises that list overseas, Reuters quoted the Chinese government’s statement on July 6 as saying.

Ride-hailing super app Didi has raised $4.4 billion from an initial public offering (IPO) on the New York Stock Exchange. Photo: Reuters

The statement came just days after Beijing opened a cybersecurity investigation into ride-hailing super app Didi Global.

Accordingly, China will regulate security and cross-border data flows, crack down on illegal activities in the stock market, and punish fraudulent securities issuance and market manipulation. and insider trading.

China will also examine capital sources for stock investments and control leverage ratios.

These adjustments to overseas-listed Chinese companies are a sharp move in a sweeping crackdown on the economy based on giant online platforms.

The US capital market has been an important source of capital for Chinese companies over the past decade, but the risk of increased scrutiny could now stand in the way of Chinese companies from listing in the US.

In the early morning hours of July 6, Didi shares lost as much as 25% in pre-opening trading, before the first official trading session was conducted since the Cyberspace Administration of China (CAC). ) ordered the removal of Didi’s app from the app stores in the Chinese market, just days after the ride-hailing super app successfully raised $4.4 billion from the offering. Initial Public Offering (IPO) on the New York Stock Exchange.

Chinese companies listed in the US, including Full Truck Alliance and Kanzhun Ltd are also forecast to open lower in the early trading session on July 6 after the Cyberspace Administration of China on July 5 released an announcement. Cybersecurity investigation report for affiliated partners of these two businesses.

“The Didi investigation opens a new front in China’s technological assertiveness,” said Rory Green, China economist at TS Lombard, an investment research firm. question of sovereignty”.

In March 2021, the US Securities and Exchange Commission began rolling out rules aimed at removing foreign companies from exchanges in the country if they fail to comply with US auditing standards. a move allegedly aimed at “ousting” Chinese businesses from US exchanges if they fail to comply with US auditing standards for three consecutive years.

In May, Reuters reported that Beijing had pressed audio platform Ximalaya to abandon its plans to list in the US and instead opt for a listing in the Hong Kong market. A Reuters source at the time said Beijing was increasingly concerned that US regulators would be able to gain more access to audit data of Chinese companies listed in New York.

US stock exchanges have long been the preferred listing site for Chinese technology companies because of their deep liquidity, high valuations, easier rules of profitability, and reputation.

Refinitiv data shows that Chinese enterprises have carried out 34 listing deals in the US up to this point, with a total mobilized value of 12.5 billion USD (excluding listing deals). by Didi on June 30).

However, a number of large Chinese companies listed in the US, including tech giants such as Alibaba and Baidu, have done secondary listings in the Hong Kong market in the past two years.