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The Chinese have a nickname for unsophisticated stock investors. They call them chives, a healthy crop that can flourish soon after planting, which keep coming up again and again — just like the chumps chasing meme stocks and blank-check companies for spectacular returns. The US market seems to be the perfect place for Chinese companies to harvest chives.
This sure feels like what’s happening with Didi Global Inc, the ride-hailing giant. Just days after the company pulled off one of the largest US public offerings this year, raising $4.4 billion, China’s cyberspace regulator ordered app stores there to remove the Didi Chuxing app, citing serious violations related to the company’s collection and usage of personal data. The latest move came just two days after regulators blocked the mainland business from adding new users, and put the company’s cybersecurity practices under review. In a statement, Didi said current users who had already downloaded the app wouldn’t be affected by the move.
Upon their return from the July 4 holiday weekend, Americans will be in for some volatile trading. This Didi probe is the first one publicised by China’s Cybersecurity Review Office. That makes the company a test case for Beijing’s fresh focus on data security, just like Alibaba Group Holding Ltd was for its antitrust crackdown on Big Tech, and Ant Group Co for the government’s rethink about internet companies’ role in financial services. We are in uncharted territory, and US investors could be on the hook for big losses.
According to the new measures, which came into effect last year, companies under review could receive initial results in as few as 45 days. But no one knows for sure how long this process will take — complicated cases could drag on — or what the penalty will be. The fine could be anywhere
between one to 10 times what the cybersecurity law vaguely defines as “illegal proceeds,†or could result in a shutdown of the entire business.
One question is why Didi decided to go public now, despite intensifying scrutiny from various government departments. In April, the antitrust regulator, along with the cyberspace watchdog, summoned over 30 major internet companies, including Didi, and asked them to conduct self-inspections about their anti-monopoly practices, tax policies and abidance to related laws and regulations.
One answer is that Didi is no longer your fresh-faced unicorn.
—Bloomberg