Ben Harburg, Managing Partner at MSA Capital, joins Worldwide Exchange to discuss the crackdown from Beijing on Chinese tech stocks, and whether more will follow Didi in de-listing their American shares. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi
Didi fell sharply Friday after the company announced plans to delist from the New York Stock Exchange and pursue a listing in Hong Kong instead.
Shares of the Chinese ride-hailing giant have been hammered by regulatory woes in its home country ever since its initial public offering in the U.S. earlier this year. The stock has now roughly halved from that listing price.
Didi’s share price sank 22%, after having initially climbed as much as 14% in U.S. premarket trading.
The company said Friday it will delist from the New York Stock Exchange “immediately” and begin preparations for a separate listing in Hong Kong. The U.S. shares are to be converted into “freely tradeable shares” on another international exchange, according to a statement.
The delisting marks an untimely end to Didi’s short-lived time as a U.S.-listed company. Investors will now be hoping for a smooth transition of Didi’s U.S.-listed shares to Hong Kong. But details on how the company will go about this are thin. The move by Didi to go ahead with the delisting at least rules out the risk of it being forced to do so by regulators.
“Despite U.S. shares being freely tradeable upon listing on the HK exchange, we think this move is likely to be the final straw for many investors who will look to cut losses,” Neil Campling, global TMT analyst at Mirabaud Equity Research, said in a note.
“The stock also has a lot of retail investors, who we presume will be trying to run for the exit.”
Daniel Ives, managing director at Wedbush Securities, said the delisting was “just another black eye for Chinese tech stocks.”
“The Street remains very various of Chinese tech stocks and this Didi situation is another cautionary tale,” Daniel Ives, managing director of Wedbush Securities, told CNBC, adding Didi shareholders would likely rotate to another SoftBank-backed company, Grab, to play the Asian mobility market.
Grab went public Thursday following a deal with the special-purpose acquisition company Altimeter Growth Corp. Shares of the Singapore-based ride-hailing and food delivery firm lost more than a fifth of their value by the closing bell.
China’s tech crackdown
Regulators in Beijing have been flexing their muscles in an attempt to keep big Chinese internet companies in line. The clampdown began with Alibaba founder Jack Ma and his fintech company Ant Group, whose IPO was suspended late last year after critical comments from the Chinese tech billionaire about regulators.
Beijing’s tech crackdown soon moved to other areas, including ride-hailing. Chinese regulators had reportedly raised concerns with the security of Didi’s data ahead of the company’s IPO in June. Two days after its debut, Didi was hit with a review from Beijing’s cyberspace agency. A week later, officials ordered Chinese app stores to remove Didi’s main app.
According to a Bloomberg report last week, Chinese regulators asked the firm’s executives to come up with a plan to delist from the U.S. Didi declined to comment at the time.
Meanwhile, Washington is also seeking to tighten restrictions on Chinese companies floating on American exchanges. On Thursday, the U.S. Securities and Exchange Commission finalized rules allowing it to delist foreign stocks for failing to meet audit requirements.
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