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Analysis

Didi plunge brings delisting questions from investors

cars driving along a highway

Chinese ride-hailing giant Didi Global said on Friday it planned to delist from the New York Stock Exchange, just five months after its debut, and pursue a Hong Kong listing.

Shares plunged 20% in response to the announcement. Didi shares have fallen about 57% since their June 30 IPO price.

Didi plans to proceed with a Hong Kong listing soon and is not looking at going private, sources with knowledge of the matter told Reuters.

It aims to complete a dual primary listing in Hong Kong in the next three months and delist from New York by June 2022, said one of the sources.

When a delisting occurs, it typically results in shareholders losing all of their investment in a particular stock unless they sell their shares before the delisting occurs, according to Investor Place.

If a company is delisted and investors do not tender their shares, some stocks can be traded on the over-the-counter (OTC) market. Buying and selling stocks on the OTC is typically more difficult.

China has implemented a sweeping regulatory crackdown in recent months on internet companies, for-profit education, and real estate developers, among others.

This unprecedented regulatory crackdown has wiped billions of dollars in market value off some of the country's best-known private firms and has weighed on foreign investor sentiment.

China's regulators asked Didi to consider delisting from the New York Stock Exchange and last week, Didi announced on its Weibo account that "following careful research, the company will immediately start delisting on the New York stock exchange and start preparations for listing in Hong Kong".

Didi said in a separate statement it would organise a shareholder vote at an appropriate time and ensure its New York-listed stock would be convertible into "freely tradable shares" on another globally recognised exchange.

China's securities regulator said on Sunday that Beijing's recent policy moves were not aimed at specific industries or private firms, and were not necessarily linked to companies seeking to list in overseas markets, Reuters reported.

Some media reports stating that China will likely ban companies with a VIE (Variable Interest Entity) structure from US listing is a case of "total misunderstanding and (is) misreading", the CSRC said.

The VIE structure, used widely by tech firms, was created two decades ago to circumvent rules restricting foreign investment in sensitive industries such as media and telecoms.

The CSRC policies are not meant to crack down on specific industry or private firms and "have no necessary connections with companies' overseas listings," the commission said.


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