The IPO of a Chinese company on the New York Stock Exchange has led to questions about investor protection as its share price tumbled after China’s internet regulator ordered app stores to stop offering its product.
After saying last week that it was investigating Didi Chuxing to protect “national security and the public interest,” the Cyberspace Administration of China (CAC) now claims that the app has illegally collected users’ personal data.
“After checks and verification, the Didi Chuxing app was found to be in serious violation of regulations in its collection and use of personal information,” it said in a statement.
Didi is a platform connecting those needing a ride with those willing to provide one, in a set up similar to that used by Bolt locally, or Uber in the US.
Recognised by TIME Magazine as one of the 100 most influential companies of 2020, it provides over 60 million daily trips, around twice the number of its US rival.
It operates in 14 foreign markets, especially in Asia, Africa, and Latin America, has driverless taxis roaming Shanghai, and has expanded into mobile payments in some markets.
It gathers vast amounts of real-time data every day, which is used to analyse traffic patterns and for autonomous driving technology.
After the crackdown, Didi’s share price slid by 25 per cent to $11.58 (€9.80), significantly below the $14 (€11.84)-per-share price offered at its $4.4 billion (€3.72 bn) IPO just last week.
On Monday, the company responded to the Chinese regulator’s move by saying, “The company will strive to rectify any problems, improve its risk prevention awareness and technological capabilities, protect users’ privacy and data security, and continue to provide secure and convenient services to its users.”
Its removal from app stores does not affect existing users, but will stop new users registering on the country’s biggest ride-hailing platform.
The company’s troubles back home have drawn the eye of politicians in Washington, with the Republican senator from Florida Marco Rubio telling the Financial Times that it was “reckless and irresponsible” to allow an “unaccountable Chinese company” to sell shares on the NYSE.
He added that Beijing’s regulatory crackdown and subsequent drop in share price “further underscores the risks” for US investors in Chinese companies.
“Even if the stock rebounds, American investors still have no insight into the company’s financial strength because the Chinese Communist party blocks US regulators from reviewing the books,” Sen. Rubio said. “That puts the investments of American retirees at risk and funnels desperately needed US dollars into Beijing.”
Former US President Donald Trump signed legislation in 2020 barring Chinese companies from selling shares in the US if they fail to submit to audits from a Washington-based accounting board for three years.
Speaking to the Financial Times, Roger Robinson, head of a consultancy based in the US capital, said the episode served “as a fresh reminder to Wall Street of the capriciousness of [the Chinese Government’s] market interventions and the [Chinese Communist] party’s total disregard for the cascading downsides”.
But China is also taking a tougher approach to its firms that decide to get listed abroad.
The Chinese cabinet has said it will step up supervision of local firms listed off-shore, setting out new guidelines for watchdogs that insist on an improvement in cross-border cooperation over audits, and an update in rules “on data security, cross-border data flow and other confidential information management.”
The announcement sent the stock price of other Chinese companies listed in the US tumbling, with both truck-hailing firm Full Truck Alliance (FTA) and job-seeking platform, Kanzhun, sliding significantly.
The proposal would grant consumers rights beyond the legal warranty
The nickel was bought by the bank from the London Metals Exchange
The move was welcomed by banking regulators around the world