Delisting of Chinese companies from American exchanges began. The first is DiDi

Chinese carrier DiDi, providing taxi and car sharing services, in the morning 3 December announced his departure from the New York Stock Exchange to the Hong Kong.

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Rumors were confirmed

A possible delisting became known a week ago. Media learned, that Chinese regulators “asked” the company to draw up a plan to leave the American site.

Rumor has it, the authorities offered DiDi two options: stop being public, that is, to leave the exchange completely, or transfer shares to a local exchange. In the first case, the company would have to return to shareholders 14 $ for paper. It was at this price that the recent IPO took place. DiDi chose the second option, just her shares, probably, on the Hong Kong stock exchange will be even cheaper, than now - 7,8 $.

Due to the negative news about the delisting, not only minority shareholders are losing, but also major DiDi shareholders. About a third of the company's shares are held by the Japanese SoftBank and the American Uber..

How it all started

DiDi held an IPO on the New York Stock Exchange at the end of June. The next day, the securities rose by 16%, with 14 to 16,4 $, and just a couple of days later, the China Cyberspace Authority began checking the company. At the time of verification, DiDi was banned from registering new users. A week after the IPO, the company's shares fell by 21%, in three weeks - on 43%, to 8 $.

DiDi is the largest taxi service in China. The service stores a large amount of data about routes and users. The authorities were worried, what a public company, traded on the American stock exchange, may leak this data. Regulators suggested postponing the IPO and conducting an audit first, but DiDi refused.

Chinese authorities have tightened control over the largest companies this year. In February, the government published new antitrust rules, and in August began drafting a data protection law. As a result, such companies suffered from the actions of the authorities, like Alibaba, Tencent, DiDi, TAL и Meituan. All this had a negative impact on stocks.. Index Nasdaq Golden Dragon China, which includes securities of US-listed companies, since the beginning of the year fell by 37%.

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Pressure from both sides

DiDi announced its delisting just hours after, as the US Securities and Exchange Commission (SEC) obliged all Chinese companies to provide correct accounting data. The SEC has amended the law and can now exclude unscrupulous foreign issuers from the exchange. The head of the commission warned about such a scenario back in August..

More often the need for such amendments was discussed last year.. Became known: management of Luckin Coffee, the Chinese equivalent of Starbucks, artificially inflates sales in reports. As a result, Luckin Coffee shares fell by 96%, and later they were completely removed from the exchange.

Probably, Chinese companies, who conduct their business honestly, would not mind sharing the results of audits. Only the Chinese authorities prohibit it by law.. The issue of investing in such companies is no longer financial, but political. As a result, both the issuers themselves suffer, as well as ordinary investors. Especially those, what do they buy ADR on American exchanges.

Homecoming

Maybe, most companies from China will start conducting initial public offerings on local, not foreign exchanges. Chinese President Xi Jinping even promised to create another site in Beijing. Now there are three exchanges in the country: in Shanghai, Shenzhen and Hong Kong.

In the DiDi situation, China made it clear, that is not interested, to have his major companies traded on foreign exchanges. Possible, that DiDi will be followed by others.

If the company's securities are traded only on the stock exchange in the United States, in case of delisting to an investor, probably, have to sell them. And if the company is located at different sites, such as New York and Hong Kong, like Alibaba, broker will be able to transfer securities from one exchange to another. But Russian investors, who buy shares on local markets, probably, gotta get rid of them too.: nor "SPb-exchange", neither Moscow still have direct access to China.