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Didi’s Rough Ride Worsens as China Said to Request Delisting

(Bloomberg) — Didi Global Inc. shares fell on Friday after Chinese regulators were said to have asked the ride-hailing giant to delist from U.S. exchanges.

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Didi’s American depositary shares closed 2.8% lower at $7.88 after regulators asked the company’s top management to remove the firm from the New York Stock Exchange on worries over security, according to people familiar with the matter. It had dropped as much 7.5% in intraday trading Friday.

“All is not well for Didi and China’s move against Didi offers a glimpse into the ongoing regulatory probe on the country’s big tech companies,” LightStream Research analyst Shifara Samsudeen wrote in a note on Smartkarma.

READ: China Said to Ask Didi to Delist From U.S. on Security Fears (2)

Didi has struggled since its U.S. debut in July after Chinese regulators launched multiple investigations into the company amid a crackdown on tech firms. The stock has declined about 44% from its initial offering price of $14.

Other U.S.-listed China stocks also dropped on Friday, with tech giants including Alibaba Group Holding Ltd. and JD.com Inc. all falling at least 0.7% as regulators in Beijing issued draft guidelines that tighten advertising restrictions. Meanwhile, Pinduoduo Inc. shares plunged 16%,the most in two years, after it reported third-quarter revenue and monthly active users were lower than analysts had projected.

The Didi news stands as warning to China’s internet sector and “is likely to keep foreign investors away from Chinese tech stocks for some time,” Samsudeen said.

A combination of China’s sweeping regulatory clampdown over the last year, coupled with a resurgence of Covid-19 cases in the country and a series of lackluster earnings reports in recent days has helped to further sour sentiment among investors and analysts alike.

The Nasdaq Golden Dragon China Index — which tracks 98 firms listed in the U.S. that conduct a majority of their business in China — has plunged 33% this year, including about 49% since a record high in February.

For Didi investors, the big mystery now becomes figuring out how a possible delisiting could work. One possible route would be for the company to pursue a straight-up privatization. Another avenue would be for the ride-hailing firm to list its shares in Hong Kong and then delist them in the U.S.

“In our view, privatization is the more unlikely option and dual listing the business in Hong Kong makes more sense,” William Mileham, analyst at Mirabaud Securities, said in written comments.

(Updates pricing throughout.)

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