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Didi To Exit NYSE, and This is Just the Beginning

Didi, the ride hiring giant and the Chinese answer for Uber has decided to exit wall street and move to Hong Kong exchange. So finally, Didi has bowed down to regulatory pressure. But does this end here? Over the past few months, we have seen an increasing scrutinization of private companies by the Chinese Communist Party, but investors believed that companies in line with CCP ideology would be left untouched, but that doesn’t look so.

With all the talk about VIEs in the market, this seems to be a big blow to other Chinese firms listed in the US stock exchanges. The Chinese govt has banned foreign investments in certain sectors like education, telecom, internet, military, etc, so companies adopt a roundabout technique to get over this Chinese regulation where a shell company is created and listed in the NYSE, and the money raised is indirectly funneled into the parent company. There has been increasing caution over Chinese VIEs over the past few months, a research also reports that Chinese VIEs are trading at a discount of about 30% when compared to non-VIE stocks. Didi a few months back was the darling of wall street with a blockbuster IPO listing and was the talk of the town, but today it has come down to about 5 dollars from near 15 levels. Those who hold the delisted shares will be allowed to swap shares in the Hong Kong exchange but it is clearly evident that Didi would not trade at even a fraction of its IPO listing day value. This move has hit stocks of other Chinese companies listed in the US. Alibaba declined to comment on the move. Though VIEs aren’t banned by the Chinese government, this is clearly a signal that China no longer needs wall street. Chinese regulators are moving to reduce the listing of Chinese firms in the US, and we can expect stringent regulations here. Though China may not ban VIEs outright, because it will be losing a lot of foreign investments, it is clearly evident that China is slowly trying to cut off its wall street ties. And it is becoming harder to predict which company might be the next target of the CCP, as it is shifting loyalty unpredictably. The recent crackdown on Tencent has made sure that CCP is leaving no one. Only time can tell what’s going to happen with Tencent, Alibaba, Baidu, and listed in the US.

Rishi D V

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