INSIDE THE DEAL

Didi didn’t dilly dally: Ridehailer raked in $4.4bn in US IPO, but gets delisted and sued as reward

By Robert Scammell

June saw Chinese ride-hailing app Didi Chuxing raise $4.4bn in its United States IPO, pricing it at the top of its indicated range with an increased number of shares sold, the company announced. By the first week of July, it was a case of Didi bye-bye as its app was kicked off Chinese stores amid the ongoing tech war with the US.

Didi sold 316.8 million American Depository Shares on June 30, versus the planned 288 million, at $14 per share.

This placed the company’s valuation at $73bn on a fully diluted basis and $67.5bn on a non-diluted basis. The decision to increase the deal size came after the Didi investor order book was oversubscribed multiple times, a source told Reuters.

The listing constituted the biggest US share sale by a Chinese company since Alibaba raised $25bn in 2014.

But by July 5th, the Didi application was removed from Chinese app stores for violating data privacy and cybersecurity laws.

The Cyberspace Administration of China (CAC) ordered app stores to stop offering Didi’s app on Sunday, citing illegal collection of users’ personal data. The removal does not affect existing users, but it prevents China’s largest ride-hailing platform from adding new users.

In a statement, the CAC said that “after checks and verification, the Didi Chuxing app was found to be in serious violation of regulations in its collection and use of personal information.”

“The company will strive to rectify any problems, improve its risk prevention awareness and technological capabilities, protect users’ privacy and data security, and continue to provide secure and convenient services to its users,” Didi said in a statement.

Upon the CAC’s announcement that it had launched a probe into the ride-hailing app, Didi’s shares dropped 5.3% just a few days after it began trading publicly.

To make matters worse, investors hit Didi in the same week with at least two lawsuits in the US after the Chinese government crackdown. Securities class action law firms filed lawsuits in federal court in New York and Los Angeles on July 6th saying the company failed to disclose ongoing talks it was having with Chinese authorities about its compliance with cybersecurity laws and regulations, according to Bloomberg.

Reportedly, the company was advised by the CAC to halt its IPO and to review its network security, weeks before the company debuted in New York. However, under pressure from investors to raise capital, Didi decided to push ahead with its listing.

Afterwards, the company publicly announced that it had no knowledge of the investigation prior to its IPO.

The US lawsuits named chief executive officer Will Wei Cheng, President Jean Qing Liu and several other executives and directors. Lead underwriters Goldman Sachs, Morgan Stanley and JPMorgan Chase, were also named as defendants, according to Bloomberg’s report.

Main image credit: Zhang Peng/LightRocket / Getty Images

11/15/2021 10:58:46