Didi Surges 35% After Regulators in China Signal End to Review

Ticker Symbol: DIDI

Chinese ride sharing app company Didi Global shares were up over 50% at one point today, and were trading up around 35% in midday trading, after the Wall Street Journal reported that regulators in China are close to ending their investigation into the company and may restore Didi’s main apps to mobile stores as soon as this week.

The Nasdaq Golden Dragon China Index was up close to 6% in last trading as shares of companies domiciled in China rose broadly on the news. Chinese regulators have been closely scrutinizing the businesses of numerous technology companies in the country, starting with action on Alibaba’s subsidiary Ant Group, which was due to come to market in any of the largest global IPOs in history in December 2020.

Investors and analysts alike are hoping that a conclusion of actions on Didi and two other companies that were announced this morning would lift sentiment on the sector and Chinese stocks. Even though the Chinese government has made conciliatory comments in the past, signaling that it was dialing back its scrutiny, ending the probe on Didi would be the first tangible and concrete sign of improved overhang.

Didi is still expected to pay a large fine and the company would be required to transfer 1% of its ownership to the state government. A direct equity holding in Didi could allow the government to have a greater say in the operations of the company. That would still be a win for Didi given that regulators initially indicated that the company would be forced to go through lengthy reviews and its customer data protection policies were called severely inadequate.

Regulators also required Didi to delist in the U.S. after its’ June 2021 New York Stock Exchange IPO. Shares are down approximately 80% from their IPO price of $14 per share. Didi has won approval from its existing shareholders to delist from the NYSE and instead list in Hong Kong to appease the Chinese government who wants the company and its trove of customer data to be shielded from U.S. regulators such as the SEC.

Companies with U.S. listed stocks such as Alibaba, JD.com, Yum China and Nio were up sharply in morning trading on the news. Investor sentiment has been improving marginally on the country from very negative levels as COVID cases ease slightly, and the government steps up stimulus measures. Ending lockdowns could further boost sentiment in China and emerging markets more broadly.

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