Didi’s Delisting Sends Warnings Through Market

Didi Delisting Comes Shortly After IPO

Chinese ride-hailing company Didi (DIDI) was delisted in the US last week. The move had been expected for months as Chinese regulators clamp down on companies trading outside of the country. However, it came shortly after Didi raised $4 billion in an IPO. Since its IPO in late June, the stock has fallen by more than 50%.

By exiting the US market, Didi is losing access to broad-based investors who can buy and sell the stock, boosting liquidity. The company is now trying to list on the Hong Kong Exchange.

Didi’s Secondary Listing

For investors who currently own shares of Didi, the stock will continue to trade over-the-counter. Typically companies trading OTC have less liquidity, trading volume, and more price volatility. Didi investors now have to decide if they should sell the stock or wait for shares to increase.

Investors may also have the option to exchange the US shares for ones listed on the Hong Kong Exchange. Not all Chinese companies trading in the US can do a secondary listing in Hong Kong but Alibaba (BABA), Baidu (BIDU), and JD.com (JD) have in recent years.

Investors Wonder What This Means for Other Chinese Companies

Didi is not the only US-listed Chinese company regulators in Beijing have been going after. While China has yet to ban foreign listings outright, it has put new rules on the books in recent months which make it more difficult. Some of those include reviews of companies’ data security practices and placing restrictions on creating a variable interest entity—a common structure for Chinese companies going public in the US.

Didi’s delisting is concerning for some investors with Chinese exposure. With the Chinese government still clamping down on foreign listings, more similar actions could come in 2022.

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