Sources: weeks before Didi's US IPO, the Chinese regulator that eventually ordered Didi's app banned had suggested to the company that it delay the listing

Ride-hailing giant, under pressure to reward shareholders, pushed ahead with NYSE listing despite concerns of China's cybersecurity watchdog

Wall Street Journal 2021-07-06

Context & Ripple Effects

Didi was already facing a Chinese antitrust probe ahead of its US listing, making the reported cybersecurity warning part of a broader regulatory confrontation rather than an isolated objection. The account clarifies why the company’s NYSE debut became a test of whether it would defer to Beijing’s concerns.

Later coverage says Chinese authorities viewed Didi’s choice to proceed as a challenge to their authority, while Didi had given regulators the impression it would pause. That gap between its regulatory posture and its communications with bankers raised the stakes beyond the IPO itself.

First-order effects

Didi’s NYSE listing proceeded despite the cybersecurity watchdog’s reported request, placing the company’s US-market plans directly at odds with Chinese regulators.
Didi shareholders and new IPO investors were immediately exposed to the risk that regulatory intervention would disrupt the company after the listing.

Second-order effects

Didi’s conflicting signals to regulators and bankers made regulatory clearance a central credibility issue for its investors and advisers, rather than a routine pre-listing condition.
Chinese authorities’ view that the listing challenged their authority set up the subsequent enforcement path, including the reported plan for a more than $1 billion cybersecurity fine and restoration of Didi’s apps.

Third-order effects

The episode points toward Chinese oversight of offshore listings being tied more closely to data and cybersecurity concerns, with corporate access to US capital contingent on domestic regulatory alignment.
For Didi, the later reported request to devise an NYSE delisting plan shows how a dispute over listing timing can evolve into pressure to reorganize where a Chinese company trades.

The trend: China’s regulatory approach is making data-sensitive companies’ overseas listings subordinate to domestic cybersecurity and state-control priorities.

Discussion

@lingling_wei @lingling_wei on x
Weeks before Didi went public in the U.S., China's cybersecurity watchdog told the company to conduct a self-review of its network security and suggested it delay the IPO. But Didi couldn't wait. SCOOP by me and @QiZHAI https://www.wsj.com/... via @WSJ
@angelazhanghk Angela Zhang on x
Didi may have underestimated the regulatory leverage possessed by the Chinese cyber regulator. This case will set up an important precedent for other Chinese tech firms—another story of ‘Killing the chicken to scare the monkeys’. @zhonggg https://www.nytimes.com/...
@bobdavis187 Bob Davis on x
Data is the new arms race between DC and Beijing. Both governments act to block the other from getting corporate data. The latest: China tries to block the IPO of ride-sharing giant Didi. ⁦@Lingling_Wei⁩ ⁦@QiZHAI⁩ https://www.wsj.com/...
@gwbstr Graham Webster on x
DiDi's cyber regulatory woes came after the company charged ahead with an IPO despite government warnings, @Lingling_Wei @QiZHAI report. They also found indication DiDi's disclosure of suppliers to the FTC could have driven cybersecurity review. https://www.wsj.com/... 1/
@lizalinwsj Liza Lin on x
Chinese authorities are working up a strong case against corporate abuse of data, yet when it comes to govt collection of data, particularly for national security, the noose has only tightened. New data security law imposes penalties on those who don't comply w such data requests…
@jasonzweigwsj Jason Zweig on x
The latest company caught in the U.S.-China crossfire is ride-hailing giant Didi, which proceeded with a New York listing despite Beijing's cybersecurity concerns https://www.wsj.com/...
@stevejang Steve Jang on x
good read on the inner workings behind Beijing cancelling Didi from app stores last wk. this new frontier in the China-US economic war is about data sovereignty and “critical infrastructure services”, but also CN dependence on US public capital markets. https://www.wsj.com/...
@jchengwsj Jonathan Cheng on x
On Tuesday's @WSJ front page: Chinese regulators suggested Didi delay its U.S. IPO, but the ride-hailing giant, under pressure to reward shareholders, pushed ahead with NYSE listing despite concerns of China's cybersecurity watchdog. @Lingling_Wei @QiZHAI https://www.wsj.com/... …
@arjunkharpal Arjun Kharpal on x
And you can see those conversations happening in the background here with Didi. @Lingling_Wei and @QiZHAI report Chinese regulators urged Didi to halt the IPO and conduct a thorough self-examination of its network security. Great detail in this piece https://www.wsj.com/...
@doveywan @doveywan on x
The fight between “US capital market” and “Chinese regulatory ask” now rises to the national security matter for both sides, many mainland operating but VIE structured co will face a hard choose to make, the watershed moment for many Chinese tech co https://www.wsj.com/...
@arjunkharpal Arjun Kharpal on x
While punishments on Didi and Alibaba are very public, there's a lot going on in the background. Beijing has given many tech companies “over 100 items of compliance requirements” from antitrust to data and advertising, a source tells me. https://cnb.cx/3xjZMrR
@vshih2 Victor Shih on x
Very timely story, although the details matter. If a 处长 suggests to me to stop an IPO, I probably would ignore it and chalk it up to a bad attempt to get a bribe. If the vice minister of that organization did so, than I would have taken it more seriously. https://twitter.com/...
@zhangtaisu Taisu Zhang on x
So it seems like the Didi fiasco was largely caused by the Chinese government's general hostility towards major Chinese IT companies going public in the U.S. (they seem to prefer HK), and that this doesn't exclusively target Didi. This would appear to... https://www.wsj.com/...
@baldingsworld @baldingsworld on x
In highly technical financial market terminology, this is what we call CYOA PR and complete BS. Here's the simple reason: do you think for one minute Chinese regulators are going to their Didi Uber the bus when US lawyers start sending subpoenas? Hells naw https://www.wsj.com/...
@jchengwsj Jonathan Cheng on x
Beijing ordered app stores to remove Didi, a second blow to the ride-hailing company days after its big IPO. Didi in response: “We sincerely thank the responsible departments for guiding Didi to inspect the risks.” @shashamimi @raffaelehuang @qianweizhang https://www.wsj.com/...
@caixin @caixin on x
Chinese ride-hailing giant Didi has taken a fresh blow as China's cyberspace regulator has ordered its app removed from domestic app stores, two days after the company was placed under review. https://www.caixinglobal.com/ ...
@herbgreenberg Herb Greenberg on x
Ah, THIS explains why $DIDI listed on the $NYSE and not Hong Kong. There HAD to be a reason. https://twitter.com/...
@next_china Bloomberg Next China on x
China ordered app stores to remove Didi Chuxing from their sites, citing serious violations on the ride-hailing firm's collection and usage of personal data https://www.bloomberg.com/...
@followtheh Tom Hearden on x
$DIDI is going to be under the deal price of $14 on Tuesday and probably a lot lower. This reads very badly. https://twitter.com/...
@reutersus @reutersus on x
China orders Didi app downloads suspended over data violation https://www.reuters.com/... https://twitter.com/...
@grizzlemedia Grizzle on x
Chinese regulator orders ride hailing app $DIDI to be removed from app stores, just days after the IPO. Investors will reassess country risk for companies operating in China.
@winfieldsmart Win Smart on x
WOW! CHINA REGULATOR ORDERS DIDI TO BE REMOVED FROM APP STORES the largest by a Chinese company since Alibaba in 2014. https://www.wsj.com/...
@etnowlive @etnowlive on x
#GlobalNews | China Regulator orders @DidiGlobal to be removed from app stores for has violations on collecting personal info. #DiDi vows rectifications after regulator orders removal of app; says new users registration halted from July 3 (Agencies) https://twitter.com/...
@tanvi_ratna Tanvi Ratna on x
And of course, this happened just days after the mega US IPO, will hit US stock holders hard. Tech is now caught in between financial warfare https://www.bloomberg.com/...
@akramsrazor DaRazor on x
After $rlx and this they need to introduce the mulligan for Chinese adr ipos. Underwriter is on hook for first six months. China Regulator Orders Didi to Be Removed From App Stores - Bloomberg https://www.bloomberg.com/...
@northmantrader Sven Henrich on x
Another IPO bites the dust. https://twitter.com/...
@thestalwart Joe Weisenthal on x
I've never seen an IPO chart look like $DIDI before https://www.bloomberg.com/... https://twitter.com/...
@robert_spalding General Spalding on x
“We must never let any internet giant control a super database that has more detailed personal information than the state, let alone giving it the right to use the data at will,” https://www.bloomberg.com/...
@apompliano @apompliano on x
Chinese regulators just ordered all app stores to remove Didi Chuxing, which is a $75 billion ride sharing company. Great reminder that capitalism and democracy are superior systems.
@ramyinocencio @ramyinocencio on x
Wow. Imagine if the U.S. ordered @Uber taken off ALL app stores. That's what Beijing did with Didi, the Uber of China. But it has WAY more users ~380 MILLION in China. (Uber? >90M in U.S.) Reason? Privacy & nat'l security concerns. @CBSNews is watching. 🇨🇳 https://www.scmp.com/..…
@chorzempamartin @chorzempamartin on x
Stunned. After bombshell investigation announced days ago, China's cyber regulator just ordered #Didi pulled from app stores in China over data protection. They let it ipo and then hammered the company. https://www.reuters.com/... H/t @shashamimi

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