A trader works during the IPO of the Chinese ride-hailing company Didi Global Inc on the floor of the New York Stock Exchange (NYSE) in New York City, the United States, June 30, 2021.
Brendan McDermid | Reuters
Didi shares fell nearly 9% in pre-trading hours on Friday morning after China, where the company is based, announced a cybersecurity review of the company.
According to an English translation of China’s announcements, new users will not be able to register for Didi’s driver service during the country’s cybersecurity review.
China’s move comes just two days after Didi went public on the New York Stock Exchange. The stock was poised to post another day of gains after closing nearly 16% on Thursday. Didi’s shares rose about 5% in pre-trading hours before China released its announcement.
Didi said in a statement that she would “fully cooperate” with the review.
“We plan to conduct a full cybersecurity risk assessment and continually improve our cybersecurity systems and technology capabilities,” a CNBC spokesperson told CNBC in an email.
China’s announcement also reflects a broader trend in the company’s regulatory action against local tech companies that were once loosely regulated. In June, Reuters reported that Chinese regulators are investigating Didi for antitrust violations. It is also reportedly investigating the company’s pricing mechanism.
Ant Group’s IPOs in Shanghai and Hong Kong were delayed last fall after Chinese regulators intervened and interviewed the company’s top executives, including Chairman Jack Ma. Regulators fined Alibaba $ 2.8 billion in April for abusing its market dominance.
Didi had warned in its IPO prospectus that it had met with regulators along with several other Chinese Internet companies earlier this year. The driver service company said they may face fines as regulators may not be happy with the inspection results.
“We cannot assure you that regulators are satisfied with our self-regulatory results or that we will respond to antimonopoly, unfair competition, pricing, advertising, privacy, food safety, product quality, tax and other related laws and regulations. We expect these areas to be monitored and examined more closely and continuously by regulators and the general public in the future, “said the company in its prospectus.
Didi was founded in 2012 and claims to have 493 million active drivers per year and 41 million average daily transactions. It started international expansion in 2018 and now operates in 14 countries outside of China.
In addition to traditional ride-hailing, Didi invests heavily in the implementation of autonomous taxis and operates several segments related to mobility.
This story evolves. Update for updates.