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Chinese ride-hailing company Didi Global reveals SEC probing its IPO
US regulator looking into alleged 'misstatements' and 'omissions' related to June 2021 USA float
Chinese ride-hailing company Didi Global is under a Securities and Exchange Commission (SEC) investigation regarding its $4.4 billion June 2021 initial public offering (IPO) in the United States.
Details of the investigation were revealed in the company’s annual SEC filings on Monday. The document showed Didi Global had been named as a defendant in several putative securities class action cases in both federal and New York state courts. The alleged offense was material misstatements and omissions in IPO-related registration statements and prospectus that were in violation of various laws.
Didi Global has asked for a stay in state court action pending the outcome of a dismissal motion in federal court that is still pending. Both actions are in preliminary stages, said the company, which also intends to "vigorously defend [itself] against these claims."
"We cannot predict the timing, outcome or consequences of these actions, and there is no basis to conclude at this point whether such actions will be successful or whether we will be subject to any damages, let alone how much," said Didi Global in its form 20-F, a filing required from foreign firms who trade securities in the US.
Despite its vow to vigorously defend itself, the company said it was cooperating with the SEC investigation, subject to strict compliance with applicable People's Republic of China (PRC) laws and regulations.
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The mobility technology platform floated on the New York Stock Exchange (NYSE) on 30 June 2021, raising enough money to become the biggest IPO of a Chinese company on an American exchange since Alibaba floated in 2014.
Just days after the IPO, Chinese regulators launched an investigation into data protection – specifically alleging that the apps collected personal information in violation of PRC laws and regulations, and then promptly removed its ride hailing from local app stores.
Twenty-five more of the company's apps were eventually taken down by the Cyberspace Administration of China (CAC), which cited national security concerns. Subsequently the stock tanked.
By late October, the CAC was pressuring the moderately disgraced enterprise to list in Hong Kong instead. And after just five months on the NYSE, Didi Global announced it would delist in favor of Hong Kong.
"We have no information on whether or when the prohibition on the download of our apps will be lifted or to measure how much of an impact it ultimately will have on our financial and operating performance. We will continue to fully cooperate with the PRC government authorities relating to the review and rectification measures," said Didi Global in the filing.
In its summary of risk factors on the Form 20-F, the company said new cybersecurity and data security measures and regulations could impose further restrictions, cause significant expenses and expose the company to new legal risks.
It also said if it was not able to attract or retain both consumers and drivers, its platform would become less appealing, which would potentially affect business and the bottom line. ®