Didi’s U.S. Road Trip Just Got Even Bumpier

The company is being probed by the U.S. Securities and Exchange Commission on matters related to its June 2021 initial public offering in New York, according to the firm’s annual report which it filed this week.

Chinese technology stocks, broadly speaking, have gotten a reprieve from Beijing: The government intends to pause its regulatory campaign against them, The Wall Street Journal reported last week. But Didi itself, which—aside from Ant Group—has been the most high-profile victim of Beijing’s ire toward the internet tech sector, is still mired in regulatory limbo at home and abroad.

Didi says it’s cooperating with the SEC investigation, subject to strict compliance with applicable Chinese laws and regulations. The company’s own take on the situation isn’t exactly reassuring: “We cannot predict the timing, outcome or consequences of such an investigation.” The stock fell 7% in after-hours trading Tuesday.

Didi didn’t reveal further details of the probe. But gaps in disclosures before the IPO is a likely area of investigation. The company didn’t tell investors that Chinese officials had urged the company to delay the IPO as the government was worried about revealing sensitive information in the offering documents. Beijing put Didi under cybersecurity review just days after the IPO, resulting in a disastrous selloff which has only worsened since. Didi’s shares are now only worth around 14% of what they were at the IPO.

The new scrutiny from the U.S. also comes as regulatory pressure from the other side of the Pacific has yet to fully ebb—comforting signals from Beijing on the overall intensity of tech crackdown aside. In December, the firm said it would seek to list in Hong Kong. But last month, Didi said that it would delist from New York before looking for a public listing elsewhere, to cooperate with Beijing’s cybersecurity probe.

Shareholders will vote on the delisting this month, but company directors and strategic investors like SoftBank and Tencent probably have enough votes to push it through. Ordinary investors which have already suffered big losses might not be able to sell their shares for a long time once the company is delisted.

The regulatory uncertainties directly hurt the company’s business, too. Didi’s revenue for the fourth quarter of last year fell 12.7% year on year as the company was banned from signing up new users and its apps were taken off app stores in China. Covid-19 lockdowns in China’s big cities are rubbing further salt into its wounds.

Like many other Chinese technology companies, Didi has taken fire from regulators both in China and the U.S. in the past year. This latest action from the U.S. shows that the light at the end of the tunnel—if indeed it ever arrives—is still very faint and far off.

Write to Jacky Wong at [email protected]