You Don’t Have to Dig Very Deep Into DiDi’s Delisting to Find the Awkward Truth

There is a game that generations of American kids play when they go to the beach that goes something like this: If we dig deep enough, I wonder if we can make it all the way to China?

It’s a fun little endeavor that usually gets curtailed by hunger, boredom or the incoming tide, but it never ceases to capture the imagination of youthful diggers — at least for a little while.

In a similar vein, we grownups are all enthralled today by the overnight news that Beijing-based rideshare giant DiDi Global has decided that, after just five months, the U.S. is no longer a good fit, leading it to delist its just-listed shares from the New York Stock Exchange in favor of somewhere better.

Wow. Let’s dig into that.

But before you grab your shovel, there are a few things to keep in mind if you’re unfamiliar with the self-proclaimed “world’s leading mobility technology platform.”

First, DiDi’s journey in the U.S. had been heading south even before it actually listed in late June. In the run-up to its NYSE debut, news reports in March had pegged the company to be worth $100 billion, but by the time DiDi finally IPO’d three months later, that valuation had been trimmed down to about $70 billion. That level lasted all of one day — and pretty much ever since, the stock has found itself digging deeper and deeper into a hole, including the early stock declines on Friday morning (Dec. 3).

After the latest surprise announcement, DiDi’s five-month excursion to the U.S. has seen the company cut in half, its shrinking valuation amounting to roughly $40 billion of evaporated equity — mostly through no fault of its own.

The slump arguably started before the company even listed amid growing concern about heavy-handed interventions from China involving other local mega caps, such as Ant Group and Alibaba.  The inference here was that no company, no matter how large or widely held by global investors, was greater than the party/nation that produced it.

After just one week of trading, DiDi’s decline started to accelerate. First, the company said its revenues were not going to be as robust as originally expected, after its app — the lifeline of its business — had been banned from local app srtore as part of a Chinese government crackdown on how consumer data was being collected, used and stored.

Read the Full Story: DiDi Warns of Revenue Drop

Days later, the slump in the newly listed stock accelerated after a pair of U.S. senators called upon the Securities and Exchange Commission to look into the veracity of the company’s financial disclosures.

More details: Senators Ask SEC to Probe DiDi IPO

Ever since, the company, which changed its name to DiDi Global from Xiaoju Kuaizhi to presumably streamline its global expansion plans and encourage its international ownership aspirations, has been caught in the middle of a bilateral feud between the U.S. and China that has left it with no safe haven to seek shelter and simply grow a legitimate business at a time of high global demand for last-mile delivery and logistics.

Make It Go Away

Caught in this crossfire, the company, which will turn 10 next year, has said it will put its decision to a shareholder vote, while also noting that it was already seeking a listing in Hong Kong and that all of this will take time to complete.

Meanwhile, DiDi will continue to be subject to the rules and regulations of U.S. securities markets, as well as to the changing policy edicts coming out of Beijing, including reports of government-approved investors taking a stake in the company, and presumably exerting some influence and oversight as well.

As much as it has been a bad day, and arguably a bad year for DiDi, there’s much more at stake than its own $30 billion market value. Whether it comes from the East or the West, the delisting news carries implications for roughly 250 other Chinese companies that are currently listed and trading in the U.S., with a combined market value of more than $2 trillion, representing a potential hole that could very well go all the way to China.