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Summary
- The price of Didi Chuxing shares slumped 20% within a week of listing on the New York Stock Exchange.
- Didi’s app is reported to collect the personal data of users. Hence, the Chinese internet regulators ordered the removal of Didi's app from online app stores.
- The removal of the app will not affect existing users, but new users will not be able to register with the platform.
The share price of China’s Didi Chuxing (NYSE:DIDI) tumbled amid a crackdown on tech firms listing overseas. The company shares made a new high on 2 July and fell close to 20% on Tuesday when China banned Didi Chixung app over the security breach.
Last week, the Cyberspace Administration of China (CAC) announced that they would be investigating Didi Chuxing in the light of national security and the interest of the public. Later, on verification, the company’s app was found to be violating regulations while collecting data and using the user’s personal information. As a result, China’s internet regulator ordered online app stores not to offer Didi's app to customers.
As per the ride-hailing company, the regulatory order could hurt the company’s revenue in the country. However, the removal of the app from app stores will not affect existing users. But new users will not be able to register with the ride-hailing platform. Moreover, the company intends to rectify the problems related to data breaches and work on its technology front to prevent data leakage and intend to offer secured and convenient service to its riders.
Since Alibaba’s debut in 2014, Didi's Chuxing was the biggest listing in the US by any Chinese company. Didi Chuxing currently offers services in 15 countries, including Russia and Australia. Their app was founded in 2012 by a former executive at Chinese e-commerce giant Alibaba, Cheng Wei. The company’s rivals are Uber and Lyft.
Didi Chuxing got listed on New York Stock Exchange last month through an Initial Public Offering. However, the shares of the company made a low of $11.58, far below its initial public offering (IPO) price of $14-per-share price.
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The concern
Didi’s app collects a large amount of data every day on real-time basis, which is used as an input in analysing traffic patterns and autonomous driving technology.
In addition to banning Didi’s app, now the Chinese cabinet will also level up the supervision of Chinese firms listed offshore. Moreover, as per the Chinese cabinet, all the regulators must work on improving cross-border cooperation over audits and continuously update rules on security of data, cross-border data flow, and management of other confidential information.
Following the announcement, other Chinese companies listed on the US stock exchanges, such as Full Truck Alliance (FTA), which recently got listed on the New York Stock Exchange, and Kanzhun also shed their gains.
