The US Securities and Exchange Commission is investigating Didi Global Inc.’s chaotic 2021 debut in New York, when the ride-hailing giant raised $4.4 billion days before revelations of a Chinese probe into data security tanked the stock.
Didi’s shares were down 7% in US pre-market trading, deepening an 85% loss since its initial public offering in the summer of last year. The Chinese company said it’s cooperating with the probe, without providing further details.
U.S. lawmakers had called last year for an investigation into Didi’s controversial IPO -— the biggest by a Chinese firm since Alibaba Group Holding China’s cybersecurity watchdog stunned investors by announcing its investigation into Didi two days after the listing, suspending the internet giant’s main apps from domestic stores.
That precipitated a flurry of regulatory action against gig-economy and internet companies, culminating in a decision to force Didi to delist from New York and float in Hong Kong instead. That process is now suspended because regulators are pressing for more severe penalties, Bloomberg News has reported.
It’s unclear when the SEC launched its own probe into the matter. Didi devoted just a few lines on the US investigation well into a 170-plus-page regular filing on May 2. Spokespeople for Didi and the SEC declined to comment.
“After our initial public offering in the United States, the SEC contacted us and made inquiries in relation to the offering,” the filing read. “We are cooperating with the investigation, subject to strict compliance with applicable PRC laws and regulations.”
The SEC probe adds to the uncertainty surrounding Didi, once the most celebrated startup in China, as it prepares to depart New York bourses under orders from Beijing. The company, once worth about $80 billion, is grappling with the broader fallout after proceeding with its IPO despite regulators’ objections. It will now likely see its stock traded over the counter on the so-called pink-sheets market, home to penny stocks and other riskier businesses. Didi said last month it hadn’t applied to move to another exchange, surprising investors who anticipated a smoother transition.
The company has been in talks with the Cyberspace Administration of China about a fine and other penalties, Bloomberg News has reported. But central government officials told the CAC they’re not satisfied with the proposed punishments and asked for revisions, people familiar with the matter have said.
Didi shareholders will vote on its delisting at a special meeting on May 23.