Uber’s Shares Dip Following A $2 billion Shrink In Its Didi Investment

The shares of Uber ended the day in negative territory after the company’s stake in Didi declined by $2 billion due to regulatory challenges in China.

Uber’s Stake In Didi Drops Massively

Tech company Uber has seen its investment in Chinese ride-hailing giant Didi drop by over 50% in the past few weeks. Uber previously has a $9.4 billion stake in Uber. However, the investment has dropped massively as the Chinese government crackdown on US-listed companies operating in the country.

Didi’s American depositary shares began trading at $14 a share in June on the New York Stock Exchange. However, the price dropped by 21% today and currently trades at $8.02. Uber controls 12% of Didi and is the second-largest investor behind SoftBank. Uber bought the stakes in Didi after selling its Chinese business to the company in 2016.

This latest development led to Uber’s stock price declining earlier today. Year-to-date, Uber’s stock has underperformed. UBER began the year trading at $51 per share but began to decline in May after reaching a yearly high of $62.

UBER stock chart. Source: FXEMPIRE

Didi Comes Under Fire

Didi has come under pressure from regulators in recent months. There was a high around its IPO, and its market cap reached nearly $70 billion. However, it didn’t get to live long in the spotlight as Chinese officials began carrying out a cybersecurity review of Didi. The ride-sharing company was then asked to postpone its listing and reviews its network security.

The company is facing further tough times after Bloomberg reported earlier this week that Chinese regulators are working on punishments against Didi. The regulators could issue a fine that would surpass the record-breaking $2.8 billion Alibaba paid earlier this year.

Some of the other touted penalties would include the delisting or withdrawal of U.S. shares, sources familiar with the matter told Bloomberg. Regulators in China are planning to limit the ability of Chinese companies to list in America and other foreign markets.

Tesla Lifts Wall Street to Close at Record Highs

The S&P 500 financials, communication services and real estate sector indexes each gained more than 0.8%.

Tesla rallied over 4% and was the top contributor to gains in the S&P 500 and Nasdaq. CEO Elon Musk insisted in court on Monday he does not control Tesla, and he said he did not enjoy being the electric vehicle company’s chief executive as he took the stand to defend the company’s 2016 acquisition of SolarCity.

The S&P 500 banks index climbed 1.3% ahead of quarterly earnings reports this week from major banks, including Goldman Sachs and JPMorgan on Tuesday. JPMorgan Chase rose over 1% and Goldman Sachs rallied more than 2%, fueling the Dow’s gains.

Investors will closely watch quarterly reports for early clues on the how long the U.S. economic recovery may last, with June-quarter earnings per share for S&P 500 companies expected to rise 66%, according to IBES data from Refinitiv.

The S&P 500 has rallied about 17% so far this year, with some investors questioning how long Wall Street’s rally may last and concerned about a potential downturn.

“Earnings season is going to be warmly greeted as an opportunity for existing biases to be confirmed,” warned Mike Zigmont, head of trading and research at Harvest Volatility Management in New York. “Even if forecasts are not as rosy as what the most bullish had hoped, it’s all going to get rationalized away.”

Focus this week will also be on a series of economic reports, including headline U.S. inflation data and retail sales. As well, Federal Reserve Chair Jerome Powell is due to appear before Congress on Wednesday and Thursday for views on inflation.

Investors have been concerned about higher inflation and the spread of the Delta coronavirus variant in the past few sessions, with traders seesawing between a preference for economy linked-value stocks and tech-heavy growth names.

The Dow Jones Industrial Average rose 0.36% to end at 34,996.18 points, while the S&P 500 gained 0.35% to 4,384.63.

The Nasdaq Composite climbed 0.21% to 14,733.24.

All three closed at their highest levels ever.

Walt Disney jumped over 4% to a two-month high after it and Marvel’s “Black Widow” superhero movie took in $80 million in its first weekend. And the entertainment company plans to raise prices for its ESPN Plus streaming service.

Didi Global Inc dropped about 7% after it confirmed China’s cyberspace administration notified app stores to remove the ride-hailing company’s 25 apps and said the move could impact its revenue in the region.

Virgin Galactic Holdings tumbled 17% after the space tourism company said it may sell up to $500 million worth of shares, a day after the company completed its first fully crewed test flight into space with billionaire founder Richard Branson on board.

Volume on U.S. exchanges was 8.3 billion shares, compared with the 10.5 billion average for the full session over the last 20 trading days.

Advancing issues outnumbered declining ones on the NYSE by a 1.43-to-1 ratio; on Nasdaq, a 1.11-to-1 ratio favored advancers.

The S&P 500 posted 66 new 52-week highs and no new lows; the Nasdaq Composite recorded 85 new highs and 38 new lows.

For a look at all of today’s economic events, check out our economic calendar.

(Additional reporting by Devik Jain and Shreyashi Sanyal in Bengaluru; Editing by Maju Samuel and Cynthia Osterman)

China Tech Crackdown Drives Selloff in Didi Global and Affiliated Firms

By Scott Murdoch and Thyagaraju Adinarayan

The ride-hailing giant’s app was ordered to be removed from mobile app stores in China on Sunday by the Cyberspace Administration of China (CAC), which had said it was investigating Didi’s handling of customer data.

The CAC on Monday also announced cybersecurity investigations into other Chinese companies whose parents have listed in the U.S., and those parents’ shares also slid.

Full Truck Alliance was down about 20% and Kanzhun Ltd was down about 8%.

The U.S. market was closed on Monday for the July 4 holiday.

Didi Global shares last traded at about $12, well below their debut price of $16.65 on June 30 – a fall of roughly $19 billion in market capitalization.

The Wall Street Journal reported on Tuesday, citing sources, that the company had been warned by regulators to delay the initial public offering (IPO) and examine its network security.

“With some news sources saying that Didi knew months in advance that a crackdown was coming, some people will start to have their doubts on governance of the company as well,” said Sumeet Singh, Aequitas Research director who publishes on Smartkarma. “If the crackdown was indeed planned months in advance, that would imply that it’s not going away soon.”

Didi said on Monday that the app’s ban would hurt its revenue in China, even though it remains available for existing users. It also told Reuters it had no knowledge of the investigation prior to the IPO.

“Didi’s app ban will hurt its user growth and, at the same time, the existing users of Didi’s app will also have a certain level of reservation over using the company’s app due to fear of compromising their personal data,” said Shifara Samsudeen, an analyst for LightStream Research who also writes on Smartkarma. “So it is obvious that Didi’s top line will be affected.”

Didi shares were sold at $14 each in the IPO, which was the largest listing of a Chinese company in the United States since Alibaba raised $25 billion in 2014. The company had been valued at up to $75 billion as of Friday.

CAC said it had ordered app stores to stop offering Didi’s app after finding that the company had illegally collected users’ personal data.

“Some investors may have taken comfort that going ahead with the listing was under the blessing of the authorities, when now we know it clearly wasn’t,” said Dave Wang, portfolio manager at Singapore’s Nuvest Capital.

Nuvest did not participate in Didi’s IPO.

(Reporting by Scott Murdoch in Hong Kong, Thyagaraju Adinarayan in London and Tom Westbrook in Singapore; Additional reporting by Divya Chowdhury in Mumbai and Caroline Valetkevitch in New York; Editing by Sumeet Chatterjee, Jason Neely and Kevin Liffey)

Didi Says App Removal May Hurt Revenue, Other U.S-listed Chinese Firms Probed

By Tony Munroe, Yilei Sun and Scott Murdoch

Sunday’s takedown order from the Cyberspace Administration of China (CAC) comes just two days after the regulator announced an investigation into the ride-hailing giant and less than a week after the firm debuted on the New York Stock Exchange.

It also comes amid a widespread regulatory squeeze on domestic tech firms, focusing on anticompetitive behaviour and data security, that began with the scuttling of a $37 billion listing planned by Alibaba fintech affiliate Ant Group late last year.

“Both the Ant IPO cancellation and this action on Didi show that IPOs can be very dangerous in China, shedding light on one’s scale and operations that invite regulatory scrutiny,” said Martin Chorzempa, senior fellow at the Peterson Institute for International Economics.

On Monday, the CAC announced cybersecurity investigations into online recruiting company Zhipin.com and truck-hailing companies Huochebang and Yunmanman, which have merged to form Full Truck Alliance. Like Didi, Zhipin.com’s owner Kanzhun Ltd and Full Truck Alliance went public in U.S. listings last month.

Full Truck Alliance said it would cooperate with the probe and will make changes to comply with rules. Kanzhun did not immediately respond to a request for comment.

“For a government that is keen to showcase its homegrown champions, one would think that China would want to deal with these issues in a timely and private manner,” said Zennon Kapron, head of research and consultant group Kapronasia, referring to the Didi and Ant investigations.

“The fact that this isn’t happening is a clear indication that China is looking to use these companies as a warning to other tech firms,” Kapron said.

DIDI’S DOLDRUMS

The CAC said it had ordered app stores to stop offering Didi’s app after finding that the company had illegally collected users’ personal data.

“The Company expects that the app takedown may have an adverse impact on its revenue in China,” Didi said in a statement but did not elaborate on the potential extent of the impact.

Analysts have said they do not expect a major hit to earnings as Didi’s existing user base in China is large. The removal of the app does not affect existing users.

In a June filing, Didi reported revenue of about 42.2 billion yuan ($6.5 billion) for the three months ended March 31. Of that, 39.2 billion yuan came from its China mobility division while about 800 million yuan came from its international business.

In addition to its dominant position in China’s ride-hailing market, Didi operates in 15 other countries.

Didi, which collects vast amount of mobility data for technology research and traffic analysis, said it will strive to rectify any problems and will protect users’ privacy and data security.

Didi is also the subject of an antitrust probe by China’s market regulator, the State Administration for Market Regulation, sources told Reuters last month.

The Global Times, a tabloid published by the ruling Communist Party’s official People’s Daily newspaper, said on Monday that Didi’s apparent “big data analysis” capability could pose risks to users’ personal information.

“No internet giant can be allowed to become a super database of Chinese people’s personal information that contains more details than the country, and these companies cannot be allowed to use the data however they want,” it said in an opinion piece.

Shares in Didi lost 5% last Friday after the news of the CAC probe, giving it a market value of $75 billion.

In its IPO prospectus, Didi said “we follow strict procedures in collecting, transmitting, storing and using user data pursuant to our data security and privacy policies.”

SoftBank Group Corp, whose Vision Fund unit holds stakes in both Didi and Full Truck Alliance, saw its shares fall 5% in Tokyo on Monday.

($1 = 6.4721 Chinese yuan)

(Reporting by Tony Munroe, Yilei Sun in Beijing and Scott Murdoch in Hong Kong; Additional reporting by Aakriti Bhalla in Bengaluru and Sam Nussey in Tokyo; Editing by Edwina Gibbs)

Didi App Suspended in China Over Data Protection

The Cyberspace Administration of China (CAC) said on its social media feed that it had ordered Didi to make changes to comply with Chinese data protection rules. It did not specify the nature of Didi’s violation.

Didi responded by saying it had stopped registering new users and would remove its app from app stores. It said it would make changes to comply with rules and protect users’ rights.

A notice on Didi’s China app showed it had updated its user information and data privacy policy on June 29, the day before its New York Stock Exchange debut.

Didi did not immediately respond to a request to explain why it had updated the policy that day.

Didi debuted in New York on Wednesday, following a $4.4 billion initial public offering (IPO).

Didi was valued at $67.5 billion in the IPO, well down from the $100 billion it had hoped for, which potential investors had resisted.

Redex Research director Kirk Boodry, who publishes on Smartkarma, said CAC’s move appeared aggressive, but that Didi had anyway been banned from adding new users during a review of its cybersecurity.

“It indicates the process could take a while, but they have a large installed base so near-term impact (is) likely muted for now.”

INVESTIGATION

Didi’s app was still working in China for people who had already downloaded it. It offers over 20 million rides in China every day, on average

CAC on Friday announced an investigation into Didi to protect “national security and the public interest”, prompting a 5.3% fall in its share price to $15.53.

The stock was sold at $14 in the IPO – the top of the flagged range.

Chinese regulators have tightened data collection rules for major tech firms in recent years.

Didi, which offers services in China and more than 15 other markets, gathers vast amounts of real-time mobility data every day. It uses some of the data for autonomous driving technologies and traffic analysis.

Founded by Will Cheng in 2012, the company has already been subject to regulatory probes in China over safety and its operating licence.

Didi had set out relevant Chinese regulations in its IPO prospectus and said: “We follow strict procedures in collecting, transmitting, storing and using user data pursuant to our data security and privacy policies.”

(Reporting by Yilei Sun and Tony Munroe, Scott Murdoch in Hong Kong; Editing by Kevin Liffey)