Share of the Chinese taxi service Didi Chuxing has fallen hard on Wall Street. More than half an hour after opening, the share was down 27 percent. The panic on the stock market is great, because the Chinese government has been cracking down on the company’s app in recent days.
The problems started last Friday with an announcement from the internet regulator in China. It announced that an investigation into the company would be launched with the aim of “ensuring national data security and protecting national security”. For the duration of the investigation, the company is not allowed to register new users.
Just at the fair
The announcement could hardly have been more unfortunate: earlier that week, on Wednesday, the IPO of Didi Chuxing had just taken place. The company then raised $4.4 billion.
On Sunday it became clear that the app of the taxi service, according to the regulator, “violates rules regarding the collection and use of personal information”. Download stores in China were then ordered to remove the app from their offer.
Didi Chuxing has chosen to list in New York because it has a large number of unlicensed drivers and therefore does not comply with legislation in Hong Kong, sources tell the Financial Times. In the weeks before the IPO, Chinese regulators would have advised the company to postpone it so that data security could be checked.
“It seems targeted,” a Hong Kong fund manager told the British business newspaper. “People wonder if Beijing is angry that big tech companies are choosing to go overseas.”
Regulators were unable to stop the IPO, but according to newspaper sources, the announced investigation and the order to remove the app from digital download stores should be seen as “punishment” for ignoring warnings.
The Wall Street Journal reports that China today announced new, stricter rules for companies that want to sell shares abroad. Supervision is also being tightened. The paper concludes that this could make it more difficult for Chinese companies to raise money in the US.