MarketsDec 6, 2021
Chinese stocks see volatility over delisting risk
Regulatory Standoff
Victor Lei
Discover
Didi learned the hard way — don’t go against China. Last Friday, the Uber of China — Didi (NYSE:DIDI) — announced plans to delist from the NYSE — months after going public. The move sent Didi down 14% since last Friday — and down 52% since its IPO.
Right before its IPO, Chinese officials warned Didi to conduct a security investigation before going public. But Didi didn’t and now it’s facing China’s wrath.
Over the past year, Chinese regulators made it harder for Chinese companies to go public abroad — first requiring companies with data on at least a million people to go through a cybersecurity and national security review.
So China made an example out of Didi:
But China’s regulations go beyond security — targeting tech giants’ growing influence and power — while US investors become collateral damage.
The US wants more information on US-listed Chinese companies — while China wants to protect sensitive information.
Last Thursday, the SEC finalized rules to ban foreign companies from US exchanges if they don’t meet auditing requirements. Foreign companies have until 2024 to abide by the rules:
But China has its own plans of banning variable interest entities (VIE) — a loophole used by Chinese companies to go public overseas, according to Bloomberg.
The China Securities Regulatory Commission came out with its own statement on Sunday — saying reports of them promoting companies to delist from the US is “completely misleading”.
For now, it looks like Chinese companies are less likely to go public in the US. But what will happen to those that are currently listed?
