China crackdown on tech and overseas-listed shares prompts sell-off of Didi, others (updated)

KANZHUN

06/07/2021 20:47

(Adds new quotes, other details, updates prices)
    By Scott Murdoch and Thyagaraju Adinarayan
    HONG KONG/NEW YORK, July 6 (Reuters) - Didi Global Inc
 DIDI.N  shares fell as much as 25% in early U.S. trading on
Tuesday in the first session since Chinese regulators ordered
the company's app to be taken down days after its $4.4 billion
listing on the New York Stock Exchange.
    The ride-hailing giant's app was ordered to be removed from
mobile app stores in China on Sunday by the Cyberspace
Administration of China (CAC), in order to investigate its
findings that the company had illegally collected users'
personal data.
    On Monday, the CAC on Monday announced cybersecurity
investigations into other China-based companies whose
U.S.-listed parents' shares also slid.   urn:newsml:reuters.com:*:nL2N2OH00S
    Kanzhun Ltd  BZ.O  and Full Truck Alliance  YMM.N  were last
down 17.4% and 14.3%, respectively. 
    Extending its actions beyond the tech sector, Beijing also
said it would step up supervision of Chinese companies listed
offshore in order to crack down on illegal activity and punish
fraudulent securities issuance.  urn:newsml:reuters.com:*:nL2N2OI0SQ
    U.S.-listed shares in Chinese hip-hop event promoter Pop
Culture Group  CPOP.O  plunged 32%.  urn:newsml:reuters.com:*:nL2N2OI1OC
    The U.S. market was closed on Monday following the July 4
holiday.
    Didi Global shares were last trading at about $12.24 - 25.5%
below their debut price of $16.65 on June 30.
    Didi said on Monday that the app's ban would hurt its
revenue in China, even though it remains available for existing
users. It also told Reuters it had no knowledge of the
investigation prior to the IPO.  urn:newsml:reuters.com:*:nB9N2NP02A
    But the Wall Street Journal reported on Tuesday, citing
sources, that the company had been warned by regulators to delay
the initial public offering (IPO) and examine its network
security.  urn:newsml:reuters.com:*:nL3N2OH33V
    
    CONSEQUENCES 
    "With some news sources saying that Didi knew months in
advance that a crackdown was coming, some people will start to
have their doubts on governance of the company as well," said
Sumeet Singh, Aequitas Research director who publishes on
Smartkarma. "If the crackdown was indeed planned months in
advance, that would imply that it's not going away soon."   
    Didi shares were sold at $14 each in the IPO, which was the
largest listing of a Chinese company in the United States since
Alibaba raised $25 billion in 2014. The company had been valued
at up to $75 billion as of Friday. 
    "Some investors may have taken comfort that going ahead with
the listing was under the blessing of the authorities, when now
we know it clearly wasn't," said Dave Wang, portfolio manager at
Singapore's Nuvest Capital.  urn:newsml:reuters.com:*:nL3N2OH17I Nuvest did not
participate in Didi's IPO.
    Market watchers said the news could have other
ramifications.
    Matthew Keator, managing partner in the Keator Group, a
wealth management firm in Lenox, Massachusetts, said: "In light
of some of the recent news, investors need to be looking at not
just valuations of the company based on global opportunities,
but keeping in the back of their mind that policies could go
into effect and how will that affect companies here in the
(United States)."  
    Peter Cardillo, chief market economist at Spartan Capital
Securities in New York, sees possibly broader, diplomatic
implications.
    "It’s backdoor to getting even with the United States while
not necessarily mentioning the United States," Cardillo said.
"This crackdown further opens the door to a potential economic
conflict."
    "Usually these things simmer down rather quickly, but this
announcement could have a lingering negative effect." 

 (Reporting by Scott Murdoch in Hong Kong, Thyagaraju Adinarayan
in London and Tom Westbrook in Singapore; Additional reporting
by Divya Chowdhury in Mumbai and Caroline Valetkevitch and
Stephen Culp in New York; Editing by Sumeet Chatterjee, Jason
Neely and Kevin Liffey)
 ((caroline.valetkevitch@thomsonreuters.com; Reuters Messaging:
caroline.valetkevitch.thomsonreuters.com@reuters.net))