Tech

Didi shares fall after China announces cybersecurity review just days after IPO

Key Points
  • Shares of Didi fell Friday after China announced a cybersecurity review of the ride-hailing company.
  • Didi is based in China, and held its IPO on the New York Stock Exchange on Wednesday.

In this article

A trader works during the IPO for Chinese ride-hailing company Didi Global Inc on the New York Stock Exchange (NYSE) floor in New York City, U.S., June 30, 2021.
Brendan McDermid | Reuters

Didi shares closed down 5.3% Friday after China, where the company is based, announced a cybersecurity review of it.

According to an English translation of China's announcement, new users will not be able to register for Didi's ride-hailing service during the country's cybersecurity review.

China's move comes just two days after Didi held its IPO on the New York Stock Exchange. The stock was poised to show another day of gains after closing up nearly 16% on Thursday. Shares of Didi had risen about 5% in premarket trading before China released its announcement.

Didi said in a statement it would "fully cooperate" during the review.

"We plan to conduct comprehensive examination of cybersecurity risks, and continuously improve on our cybersecurity systems and technology capacities," a spokesperson told CNBC in an email.

China's announcement also reflects a broader trend of the country's regulatory crackdown on technology companies based there that were once loosely regulated. In June, Reuters reported that Chinese regulators were probing Didi for antitrust violations. Beijing is also reportedly looking into the company's pricing mechanism.

And last fall, Ant Group's IPO in Shanghai and Hong Kong was delayed after Chinese regulators stepped in and interviewed the company's top executives, including Chairman Jack Ma. Regulators hit Alibaba with a $2.8 billion fine in April, saying the company abused its market dominance.

Didi had warned in its IPO prospectus that it met with regulators earlier this year, along with several other Chinese internet companies. The ride-hailing company said it might be subject to penalties, as regulatory bodies might not be satisfied with the inspection results.

"We cannot assure you that the regulatory authorities will be satisfied with our self-inspection results or that we will not be subject to any penalty with respect to any violations of anti-monopoly, anti-unfair competition, pricing, advertisement, privacy protection, food safety, product quality, tax and other related laws and regulations. We expect that these areas will receive greater and continued attention and scrutiny from regulators and the general public going forward," the company said in its prospectus.

Founded in 2012, Didi said it has 493 million annual active riders, and 41 million average daily transactions. It began expanding internationally in 2018, and the company now operates in 14 countries outside of China.

In addition to traditional ride-hailing, Didi is heavily invested in making autonomous taxis a reality, and operates several segments around mobility.

Before going public, Didi was a four-time CNBC Disruptor 50 company that ranked No. 5 on this year's list.

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China announces cybersecurity investigation into Didi Global