Mohit Oberoi
Chinese ride-hailing app Didi is now back on the growth track and is considering expanding its services in China after a regulatory probe into the company ended.
In its statement, Didi said, “Currently, traveling and consumption are quickly recovering across China. The number of orders for online ride-hailing is constantly increasing.”
Notably, Didi apps returned to China app stores in January only after they were pulled out in July 2021. The last couple of years has been quite tumultuous for Didi as well as its investors.
The company which is backed by Alibaba, SoftBank Group, and Tencent went public in the US in June 2021.
Didi’s listing in the US was in trouble from the very beginning. The company had warned of the investigations in China in its IPO prospectus only.
Shortly after the IPO, Chinese regulators initiated a cybersecurity review into Didi. Not only the country banned new app downloads of Didi but eventually forced it to delist from the US markets.
Last year, China fined Didi $1.2 billion accusing it of breaking the country’s data security laws. Notably, Alibaba also faced a record $2.8 billion fine in China in an antitrust case.
Alibaba stock plunged below its IPO price last year but has since rebounded. Chinese stocks rose in Q4 2022 after the country ended its zero-COVID policy.
Meanwhile, Didi wasn’t able to onboard new customers for months before China finally allowed new app downloads in January.
Didi Now Looks at Growth after Regulatory Probe Ends
The company is now looking at growing its business. China has taken several measures to restore investors’ confidence.
Amid a slowing economy and rising coronavirus cases, China has given multiple hints that it is now looking for rapprochement.
Earlier this year the China Banking and Insurance Regulatory Commission approved Ant Financial’s request to more than double its registered capital for the consumer unit.
Ant Financial meanwhile said that it does not have any current plans of going public. Vinfast, the Vietnamese electric vehicle maker has also reportedly delayed IPO plans amid the market sell-off.
China Has Signaled an End to the Tech Crackdown
In January, Guo Shuqing, Communist party chief of the People’s Bank of China said that the institution would support private companies amid the turmoil. Notably, China cracked down against the private Big Tech companies as part of the crackdown as the leaders feared that they are getting too powerful.
China also struck a deal with US regulators that would help prevent the forced delisting of Chinese companies from the US markets. China has allowed US regulators to audit the books of US-listed Chinese companies failing which they would have been delisted.
Didi Delisting Was a Blow to Investors
Alibaba and Didi were among the faces of China’s tech crackdown that began in 2021.
Didi eventually delisted from the US markets. The stock crashed on the news and along with retail investors, SoftBank and Uber too suffered massive losses as they are the biggest stockholders in the company.
The delisting, which happened within months of the IPO, eroded the markets’ confidence in Chinese IPOs.
Earlier this year, China announced a new set of rules for domestic companies looking to list overseas.
The China Securities Regulatory Commission (CSRC) would have the power to scrutinize any overseas IPO of Chinese companies. The rules mandate that overseas listing of Chinese companies should not be a threat to the country’s national security.
Incidentally, China forced Didi to delist over national security concerns. One of the reasons China forced Didi to delist from the US was because the country feared that the data of Chinese citizens might be compromised.
Commentators in China also pointed to the foreign ownership of Didi as SoftBank and Uber own the majority of the shares.
Meanwhile, things now seem to be getting normal for Didi as it plans expansion after nearly two years of turbulence.
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This article was written for Business 2 Community by Mohit Oberoi.
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