Shares of Didi (NYSE: DIDI) jumped this week, amid reports that the Chinese government may be mulling a plan to take control of the plagued ride-hailing company.
According to Bloomberg, which cited individuals familiar with the matter, Beijing is apparently in the midst of devising a plan to take control of Didi, by acquiring a stake in the ride-hailing firm via a number of government-backed companies. The government’s proposal suggests that Beijing Tourism Group, as well as several other state-owned companies, would invest in Didi, which could subsequently grant the government veto power and a board seat.
Following the news, Didi rose by more than 5% on Friday, bringing its total gains for the week close to 15%. However, despite this, the stock still remains significantly below the value at the beginning of its IPO debut on the NYSE. It still remains unclear the exact effect such government control will have on the company’s ADR structure, which is what allows it to list on the US exchange.
Didi came under significant regulatory scrutiny after the Cyberspace Administration of China found out the ride-hailing giant was unlawfully collecting personal data. The company was forced to suspend any new user onboarding, and its app was removed from app stores across China. In the meantime, the SEC ramped up its regulatory oversight of US-listed Chinese companies, by imposing additional disclosure requirements regarding potential risks to investors.
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Information for this briefing was found via Bloomberg. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
