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Didi, the Chinese app that raised more than $ 4 billion in a IPO in New York last week, lost a quarter of its market value on Tuesday during the first trading session after Chinese regulators announced a research on the company.
Just before the market opened in New York, the Chinese government announced it would tighten restrictions on foreign exchange trading, jeopardizing the lucrative pipeline of Chinese companies seeking to raise capital on Wall Street.
In an announcement titled, “Compressing Illegal Securities Activities,” China’s top governing body, the State Council, said it would act to strengthen the protection of sensitive data related to overseas listings and “consolidate information security responsibilities of listed companies abroad “. ”.
“This is the direction from the highest level. The outlook not only for the Chinese market, but also for its regulatory framework, could see dramatic changes, ”said Bruce Pang, head of research at China Renaissance Investment Bank.
Pang added that in the short term, the new rules could impose long waiting periods on any company that wants to trade abroad, which “will affect investor sentiment, depress IPO valuations in the United States and make it difficult to collect.” background in New York “.
Thirty-four Chinese companies hit a record $ 12.4 billion in New York during the first half of 2021, according to Dealogic, which also showed that Wall Street investment banks enjoyed a record about $ 460 million during the period.
Didi led the fall in Chinese stocks in New York, hitting a low of $ 11.58 in early operations after closing Friday at $ 15.53. On its opening day, Didi shares briefly touched $ 18.01 before retreating.
Due to the July 4 holiday, the session was the first opportunity for investors to react on Sunday to orders from the China Cyberspace Administration (CAC) for Didi to withdraw its application from the Chinese market because it had infringed laws on the collection and use of personal data.
On Monday, the CAC also declared an investigation into the Full Truck Alliance, another Chinese company it recently listed in the U.S., which saw its shares fall 19 percent. Baidu and JD.com fell 3%, while Alibaba shares fell 2%.
Didi said it will “strive to correct any problems, improve its risk prevention awareness and technological capabilities, protect users’ privacy and data security, and continue to provide safe and convenient services to its users.” The group added that it “expects the withdrawal of the app could have a negative impact on its revenue in China.”
The CAC had recommended in the weeks leading up to the U.S. listing that the company delayed its IPO until it had conducted a security review of its data, said a person close to Didi. Didi said Monday that he “did not know” the regulators’ decision to intervene until after its IPO.
Reports by Hudson Lockett and Tabby Kinder in Hong Kong and Sun Yu, Christian Shepherd and Yuan Yang in Beijing.
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