Here is why DiDi jumped 50%

on Jun 8, 2022
  • Didi jumps 50% after Chinese Regulators complete probe into the company
  • Apps of the ride-hailing giant and for its affiliates to be reinstated in domestic app stores
  • Didi to face penalties after the conclusion of the investigation

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Chinese ride-sharing company DiDi Global Inc (NYSE: DIDI) jumped 50% following reports that Chinese regulators had ended investigations into the company. According to the Wall Street Journal, regulators had indicated that they would lift the ban on the company adding new users from next week.

Didi apps to be reinstated in domestic app stores

Also, the regulators plan to reinstate its applications, including online recruitment company Kanzhun and logistics platform Full Truck Alliance Co. on the local app stores, according to people familiar with the matter who sought anonymity. Chinese regulators had removed the apps from domestic app stores, citing security concerns as they cracked on data security probes onto the firms.

China has strengthened regulations on its local tech industry in categories ranging from data protection to antitrust since 2020. However, as China struggles with the economic consequences of weeks of pandemic lockdown in Shanghai, Beijing has signals of regulatory loosening.

As a consequence of Beijing’s crackdown, Didi has been among the worst-affected firms. The ride-hailing company was listed in the United States last year. The firm raised $7 billion from the public offering. However, Chinese regulators launched a cybersecurity investigation into the firm days after it went public. As a result, DiDi’s market value tanked in the months that followed, and barely a year after listing in the US, the company delisted from the NYSE.

The Chinese Cyberspace Administration accused Didi of improperly capturing users’ data in July, and its application was withdrawn from domestic app stores.

Didi to face penalties after the conclusion of the investigation

Together with its affiliates, the Beijing-based company currently has a combined market cap of approximately $25 billion versus $115 billion in July last year before regulators started investigating the company.

WSJ reported that according to sources, the regulators would complete an investigation into the companies at almost the same time. Following the probe’s conclusion, the companies could face financial fines, with the penalty being substantial for Didi while it will be lenient on the other two companies.

According to sources, the companies will give the state a 1% interest in their holds, with the Chinese government having a direct role in corporate decisions.