Didi’s shares drop as more penalties loom

Chinese ride-hailing titan Didi plunged by more than 11 percent in New York shares on Thursday, following whispers of impending new penalties by Beijing on the company.

The ride-hailing giant is once more exposed to further pressure from the Chinese government leading to harmful impact on its revenues after trustbusters ordered it to be removed from local app stores.

In the U.S., Didi raised $4.4 billion in its stock market debut by the end of June. Two days later, China’s internet regulator launched a security investigation addressing the company’s methods of collecting data resulting in a 11.3 percent tumble in its listed shares.

The Chinese ride-hailing giant witnessed a 25 percent decline since its market debut on June 30 when it initially started trading at $14 a share. Didi’s shares fell more than 10 percent, bringing its month-to-date losses to 27 percent.

Last week, officials from seven Chinese government departments visited the company’s offices to conduct a cybersecurity review forcing it to stop signing up new customers, while the company was forced to reconstruct information about its users.

This came just days after the tech giant started selling shares in the New York Stock Exchange for $10.20 per shares, with a 11.3 percent decline as of date of writing.

As it is forceable, this move will only increase the pressure on the company and its investors as it will result in selling some of its shares to some of China’s Big Tech companies, such as Tencent, Alibaba, and JD.

As a result of their security review, regulators will suspend several of Didi’s operations and implement a state-owned investor in the company. This will most likely lead to a pressed delisting of some of the company’s biggest names.

The imposed penalties will most likely include fines, suspending some operations or government investment in the company which most likely force it to remove some of its shares from the U.S. stock market, according to a Bloomberg report.

But while Beijing is putting in its best effort to tame China’s Big Tech firms, restrictions on Didi are not the country’s first attempt to tighten its control over the tech industry.

Back in April, Alibaba group – the world’s largest e-commerce platform – was fined a whopping $2.8 billion for anti-competitive tactics, after the official investigation discovered foul play in the company’s platform’s market position.

For Didi, chances are the punishment imposed on it will be much more serious than the fine executed on the Chinese e-commerce giant.

China’s tech giants are falling under harsh scrutiny from the country’s officials as 12 other companies were fined over monopolizing deals following the President Xi Jinping’s reinforcement on regulators to step up their surveillance on monopolies.   

The list consisted of some of the biggest names, including Baidu, SoftBank, ByteDance, and even Didi.  

Escalations will keep on mounting between Beijing and its Big Tech firms, especially as China is constantly searching for new ways to execute its authority through regulations in various aspects of the tech ecosystem.