Didi investors will vote in the NY delisting after the Beijing crackdown

(Bloomberg) – Didi Global Inc. It is widely expected that Monday will be a blessing for shareholders in New York, an 11-month ordeal that has wiped out nearly $ 60 billion of its market value and turned the ride-hailing giant into a symbol of China’s technology crackdown.

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According to market observers, SoftBank Group Corp., Tencent Holdings Ltd. And Uber Technologies Inc. Co-Internet firm’s biggest supporters are expected to vote in favor of the listing at an extraordinary general meeting in Beijing. This will clear the way for the company to collaborate with regulators who are claiming overhaul of its data systems as part of a cybersecurity review. Only then will Didi be free to start preparing for Hong Kong’s share float, with investors saying they can expect the best results.

The retreat is seen by many as the presence of a company known for pushing restrictions on Beijing authorities.

After years of rapid growth, Didi went ahead with an initial public offer in June 2021, despite regulatory opposition. Just days after the $ 4.4 billion IPO, the country’s Internet overseer shut it down in China’s App Store and launched a massive cyber security investigation into the company amid concerns about data leaks to a foreign power. The debut was so controversial that it triggered an onslaught of regulatory activities that prevented Chinese companies from raising capital abroad.

SoftBank and other key proponents are likely to support Didi’s delisting from the New York Stock Exchange in the hope that it will satisfy Beijing, securing the possibility of a return to Hong Kong with a list of events. Softbank officials were not immediately available for comment.

Shen Meng, director of Chanson & Co., a Beijing-based boutique investment bank, said investors had little choice but to list but would closely track Didi’s fate to see if they could still rely on the Chinese market. It is unknown at this time what he will do after leaving the post.

“Didi’s proposed delisting, if realized, would certainly be a serious blow to investor confidence in Chinese stocks,” he said. “If listed companies can ‘regenerate’ Hong Kong with good valuation and liquidity, market concerns over Chinese investment will probably go away in a short time,” he said. After all, investors don’t consider whether a company is listed in Hong Kong or the United States, unless they can get a good return on investment. “

Didi’s shareholders, including Fidelity Investments and BlackRock Inc., have so far refrained from commenting on the delisting.

Read more: Objection to the punishment proposed by the authorities as Didi’s fate was unprepared

Beijing’s crackdown on Didi and anger at other powerful firms such as Alibaba Group Holdings Ltd. began selling globally to Chinese technology companies last year, prompting investors to question Beijing’s intentions for an industry that has accumulated so much wealth and power.

Didi was founded in 2012 by Cheng Wei, an Alibaba veteran whose brush techniques are credited with making Didi one of the largest ride-hailing services in the world, and one of the few that has been able to stop competition from Uber. After a heated price war between the two companies, Didi bought Uber’s China operation in 2016.

The company, valued at about $ 80 billion in the company’s IPO, is likely to see transactions in the so-called pink-sheet market, penny stocks and other risky trading counters.

Some investors may be forced to sell because their orders do not allow them to hold listed shares. Hedge funds have already slashed their sister holdings by 29% to about 1 231.9 million, according to an analysis by Bloomberg Filing. Even those who are exempt from such mandates, such as Softbank, may question whether it is worthwhile to hold on to shares in the face of uncertainty over Beijing’s penalties, increased competition from smaller rivals, and a halt in expansion abroad. SoftBank has invested more than 12 12 billion in the company and its 20% stake has fallen from $ 16 billion to under $ 2 billion.

Monday’s vote will be conducted on a 1 vote-per-share basis. Didi’s management, Softbank, Uber and Tencent all hold about 48% of Didi’s equity ownership, according to its annual report. Didi May said in the filing that a simple majority was needed to speed up the delisting and that the company could postpone the meeting if the shareholders backed down.

Read more: Didi sinks 44% after planned Hong Kong stock list closure

The ride-hailing giant has explored several options, including hiding data from a third-party Chinese firm and selling shares to a state-backed company, Bloomberg News reported.

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