As China starts to crack down on tech firms with cybersecurity probes, investors may begin to feel the heat.
This article was originally written by MyWallSt. Read more market-beating insights from the MyWallSt team here.
Following a probe into recently IPO’d DiDi, other U.S.-listed stocks could be next.
What can investors do?
Last Thursday, I wrote about the excitement behind DiDi’s U.S.-listing, and a day later, it was being investigated by the Cyberspace Administration of China (CAC).
CAC ordered app stores across China to remove DiDi for download just days after its U.S. IPO, alleging that DiDi had illegally collected users’ personal information and asked the company to fix the problems.
Announcements such as this have a tendency to panic investors, and this proves doubly true when it comes to China-based stocks listed on the U.S. exchanges. The reason for this is that, unlike U.S. tech companies, who are routinely slapped with near-meaningless probes related to data and antitrust, China tends to take these probes a step further.
For example, back in April, Alibaba, one of the biggest companies in the country, was slapped with a $2.8 billion fine following an anti-monopoly probe, while food delivery company Meituan is under a similar investigation.
China doesn’t play around when it comes to its probes, which is why DiDi is probably going to sort out whatever issues it has been accused of having, lest it risks a whopping fine.
Let’s look at the bright side of China’s recent crackdown on regulating the tech industry. Now, companies like DiDi will operate more transparently, and could end up being a safer investment than they would be in a country that did not regulate their privacy and data actions.
China has a long way to go to become as transparent as its U.S.-listed counterparts, but these probes are a good start.