What Does DIDI Delisting Imply for Other Chinese Stocks in the U.S.?

Shares of ride-hailing platform DiDi Global Inc. (DIDI) have nosedived by 85.8% over the past 12 months. Post this fall, the company still has a market cap of about $11.9 billion.

DIDI is holding an extraordinary general meeting (EGM) of investors on May 23 to vote on its voluntary delisting of American Depository Shares (ADRs) from NYSE “as soon as practicable.”

While it is cooperating with the cyber security review in China, the company noted it will not apply to list its shares on any other stock exchange before the completion of the delisting. April 28 has been fixed as the record date for voting in the EGM.

In its recent fourth-quarter performance, total revenue dropped to RMB 40.78 billion from RMB 46.7 billion a year ago.

Shares of the company fell about 20% on Monday after it announced the AGM date.

China Woes

The private sector in China has seen a major government crackdown after a cybersecurity probe was announced following DIDI’s listing. Investor confidence seems to have taken a beating as the company did not announce any immediate plans to relist.

Chinese authorities (China Securities Regulatory Commission) stated that this delisting is not related to other Chinese companies listed in the U.S. or the process to resolve audit disputes with US regulators.

Major Chinese names such as Alibaba (BABA) and Baidu (BIDU) have seen a major price decline in the past 12 months amid the regulatory changes in China and the audit requirements of the SEC.

Nonetheless, in a positive development this month, Chinese authorities have indicated that they will give complete access to U.S. auditors to companies’ audit reports.

Closing Note

The delisting announcement delivered a major blow to investor confidence in the stock. Meanwhile, the Chinese authorities’ intent regarding access to audit reports may result in positive developments for other Chinese stocks listed in the U.S.

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