Didi investors vote to delist in the United States in order to revive business in China

Chinese ride-sharing group Didi has notified the New York Stock Exchange that it will delist in the United States after shareholders overwhelmingly backed a plan designed to restore the company’s services to app stores Chinese.

The company said more than 95% of shares issued in Monday’s vote approved its delisting plan, nearly a year after Didi launched a $4.4 billion initial public offering in the United States despite signals from Chinese regulators warning against the move.

The botched IPO, which took place on the eve of the centenary of the Communist Party, plunged the company into a months-long crisis. Didi’s shares have fallen 90% since its IPO, wiping $60 billion off its market value.

Beijing’s cybersecurity probe, launched just days after the IPO, has prevented Didi from recruiting new users, reducing its revenue and increasing losses, while layoffs have contributed to lower morale.

Didi founders Cheng Wei and Jean Liu, who have both retired from the spotlight, hope exiting the U.S. market will prompt Beijing to wrap up the regulatory probe. Didi said the executives, who together own about 10% of the company’s stock, would vote to delist.

The company’s board, which includes representatives from major shareholders including technology groups Alibaba, Tencent and Apple, had also backed the measure. Didi said he will file paperwork with the U.S. Securities and Exchange Commission to begin the delisting process as early as June 2.

However, Didi said this month that it “remains uncertain” whether all of the company’s proposed rectification measures, including delisting, would appease Beijing and allow it to “resume normal business”.

The company had at one point hoped to list its shares in Hong Kong before delisting in the United States, but the ongoing regulatory investigation ruled out those plans.

Bernstein analyst Cherry Leung said Didi was in limbo as Beijing’s regulatory crackdown persisted. “Didi is currently in a deadlock situation until China’s cybersecurity investigation is completed,” she said.

“Regulators on the Chinese side want Didi to limit disclosures to the SEC,” she said, noting that switching to over-the-counter trading would allow the company to stop filing financial reports with the US regulator. and put his audit documents out of reach. of the United States Public Company Accounting Oversight Board. Beijing does not allow the PCAOB to perform inspections of audits performed in China.

Leung warned that class action lawsuits by investors in the United States and compliance issues with Didi’s transportation business would be additional hurdles to a listing in Hong Kong once the cybersecurity investigation is settled.

The delisting comes despite repeated promises from top economic officials, including Vice Premier Liu He, that China would end a regulatory onslaught targeting its top tech companies.

But the investigation into Didi was led by the Cyberspace Administration of China, a Communist Party body that answers to Chinese President Xi Jinping.

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

Additional reporting by Nian Liu in Beijing