Billions of dollars were wiped out of the value of Chinese rideshare app Didi on Tuesday, after a crackdown on the country’s tech sector by Chinese authorities resulted in a massive sell-off.
Shares of the company fell around 22% to $ 12 (£ 8.70), days after its IPO on the New York Stock Exchange, reducing its market value by around $ 17 billion.
It was the first opportunity for investors to trade shares of the company since the Chinese Cyberspace Administration (CAC) ordered on Sunday that Didi be removed from mobile app stores in China. The CAC said it was investigating Didi’s processing of customer data, in order to protect “national security and the public interest.” Wall Street was closed Monday for Independence Day.
Beijing also said on Tuesday it would tighten the rules for companies seeking to be listed overseas, which analysts said would further limit Chinese companies’ overseas ambitions.
The government has said in new guidelines that it needs to strengthen “cross-border regulatory cooperation” and amend laws and regulations “on data security, cross-border data flows and other management of confidential information.”
The sale was not limited to Didi; Shares of other Chinese parent companies listed in the United States also fell sharply on Tuesday, including trucking firm Full Truck Alliance – also under investigation by CAC – and recruitment platform Kanzhun.
It is the latest in a series of regulatory crackdowns by Beijing against tech companies in China, including US-listed and Hong Kong-listed e-commerce company Alibaba.
Analysts said Beijing’s recent actions against overseas listed companies signaled a significant step forward in a sweeping crackdown on its burgeoning and once free “platform economy”.
“The new rules signal China’s stance on data security and more broadly, cybersecurity. [They] also set the limit for companies aspiring to be listed overseas so they know how to proceed, ”said Feng Chucheng, partner of Beijing-based consulting firm Plenum.ai.
“Going forward, the review of cybersecurity with a particular focus on data security, especially towards those seen as critical information infrastructure operators, will become the new standard. “
Didi’s troubles came two days after his mega IPO in the United States last week. Authorities on Friday announced an investigation into the company, which has more than 377 million active users and 13 million drivers across China.
Then, on Sunday, China’s cyberspace regulator ordered smartphone app stores to remove the Didi app after alleging the company “illegally collected users’ personal data.” At around the same time, the regulator also ordered online recruiting platform Boss Zhipin and two truck delivery services run by the Full Truck Alliance to stop registering new users.
The state-owned Global Times said the move showed “Beijing’s resolve to improve data security.”
“Regulatory actions against Didi, which came as China stepped up its crackdown on illegal activity on online platforms, including violations of anti-monopoly and privacy laws, showed the determination of Chinese regulators to strengthen protection of information and personal data, ”the popular tabloid said, citing local analysts.
In response to the measures taken by the regulator, Didi said he expected the removal of the app “could have a negative impact on its revenues in China.” Didi also pledged that he would “seriously rectify and reform existing problems, and … conscientiously ensure the security of the personal information of many users.”
“We sincerely thank the responsible departments for guiding Didi to inspect the risks,” the company said on Chinese social media on Sunday evening.