Didi investors to vote on US delisting in bid to revive China business

Shareholders of ride-hailing group Didi Chuxing will on Monday vote on delisting from the New York Stock Exchange, in a bid to get the company’s services back on to Chinese app stores for the first time in almost a year.

The plan to delist comes almost a year after the company pushed ahead with a $4.4bn initial public offering in the US despite signals from Chinese regulators cautioning against proceeding with the listing.

The botched IPO, which occurred on the eve of the Communist party’s centennial, has plunged the company into a months-long crisis. Didi’s shares have fallen 90 per cent since its IP0, wiping $60bn off its market value.

Unable to sign up new users, Didi’s revenues have tumbled and losses have widened, while lay-offs have added to sagging morale.

Didi’s founders Cheng Wei and Jean Liu, who have both retreated from the limelight, hope leaving the US market will spur Beijing to wrap up the regulatory probe. Didi said the executives, who together own about 10 per cent of the company’s shares, would vote in favour of delisting.

The company’s board of directors, which includes representatives from large shareholders including tech groups Alibaba, Tencent and Apple, has also backed the measure, which could technically move forward without the simple majority approval Didi has put to shareholders.

But it remains unclear if going through with the delisting will be enough to immediately appease Chinese regulators. Didi said this month that it “remains uncertain” if all of the company’s proposed rectification measures, including delisting, would mollify Beijing and allow it to “resume normal operations”.

The company had at one time hoped to list its shares in Hong Kong before delisting in the US but the regulatory probe sidelined such plans.

Cherry Leung, an analyst at Bernstein, said Didi was in limbo while Beijing’s regulatory crackdown persisted. “Didi is currently in a deadlock situation until the cyber security investigation in China is over,” she said.

“Regulators on the China side want Didi to limit disclosures to the SEC,” she said, noting that moving to over-the-counter trading would allow the company to stop filing financial reports with the US regulator and put its audit papers beyond the reach of the US Public Company Accounting Oversight Board. Beijing does not allow the PCAOB to conduct inspections of audits done in China.

The expected delisting comes despite repeated pledges by top economic officials, including vice premier Liu He, that China would wrap up the regulatory onslaught targeting its top tech companies. 

But the probe into Didi has been led by the Cyberspace Administration of China, a Communist party body that answers to China’s president Xi Jinping.

The regulator has been at the forefront of China’s tech crackdown, and in the past two years has expanded its regulatory remit from propaganda and online censorship to control of data and network security.

Additional reporting by Nian Liu in Beijing