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Didi Chuxing: Chinese government to interfere in management

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Didi Chuxing, the world’s largest home-based transportation company, may be interfered with by the Chinese government. Chinese officials are reportedly mobilizing state-owned companies to ensure the city of Beijing has a “Golden Share,” a position that allows it to veto major decisions.

The Wall Street Journal (WSJ) reports on the 3rd (local time) that Beijing is exploring ways to secure golden shares through a consortium of state-owned enterprises.

didi chuxing to be interfered

The Chinese government is concerned that a listing on the U.S. stock market could expose large amounts of personal information held by Internet companies in China to foreign countries, as part of hegemonic struggles with the United States. As a result of these concerns, it has also been reported that policy is being revised to prevent the listing of Internet companies on foreign stock exchanges. Securing a stake in Didi Chuxing is expected to alleviate the concerns of the Chinese government.

“Buying a stake in the company and influencing its decisions is a great way to prevent personal data from being leaked abroad.”

The Chinese government has already acquired a stake in ByteDance, the parent company of TikTok, and one last year in Nio, a Chinese electric vehicle startup.

In a similar way, this would impact Didi Chuxing’s governance structure.

Didi Chuxing in trouble
Didi Chuxing caused a stir in late June by proposing a $4.4 billion listing on the New York Stock Exchange (NYSE) with the approval of the Financial Supervisory Authority, despite opposition from the Cyberspace Administration of China (CAC).

After that, Didi Chuxing came under intense scrutiny from the authorities and faced a major investigation, starting with the investigation of competition authorities, and its share price collapsed.

China removed Didi Chuxing from its major apps during the investigation period to prevent the acceptance of new members. Seven departments of the Chinese government are currently investigating Didi Chuxing.

On the stock market side
Didi Chuxing’s ADR (American Depository Receipt), listed on the US stock exchange, has almost halved in value since its listing.

The closing price on the 2nd was $8.81, less than half of the IPO price of $14.

The share price has rebounded, however, after reports that the Chinese government may take a stake.

After trading nearly 7% on the 3rd, it finally closed at $9.02, up $0.21 (2.38%).

For MetaNews.

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Jonathan Hobbs

Jonathan Hobbs is an Australian investor and author that trades on a variety of asset classes, including currencies, equities, and commodities. Jonathan’s experience as a macro trader leverages his unique writing style to combine important elements, such as technical analysis and news. The other elements that he brings into his unique writing styles are foundation analysis aimed at rational equilibrium values, evaluating the sizes and motivations of buyers and sellers, as well as identifying the needs of the buyers and sellers in the individual markets. Jonathan is committed to quality writing for new traders as well as veterans.

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