Didi shares slump 25% in pre-open trade on China crackdown

Didi Global Inc shares slumped 25% in U.S. pre-market trade on Tuesday, ahead of its first session since Chinese regulators ordered that the company's app be taken down days after its $4.4 billion listing on the New York Stock Exchange. 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 followed an official investigation into the company's handling of customer data.

Didi Global Inc shares slumped 25% in U.S. premarket trade on Tuesday, ahead of its first session since Chinese regulators ordered that the company's app be taken down days after its $4.4 billion listings on the New York Stock Exchange.

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 followed an official investigation into the company's handling of customer data. The U.S. market was closed on Monday for the July 4 holiday.

In pre-market trade on Tuesday, Didi shares fell as much as 25% to $11.59, well below its debut price of $16.65 on June 30. At that pre-market level, Didi is set to shed nearly $19 billion in market capitalization. "In terms of the fundamental impact that (share price fall) is a bit harsh, in our view," said Sumeet Singh, Aequitas Research director who publishes on Smartkarma, told Reuters.

"But 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 the governance of the company as well." The Wall Street Journal reported on Tuesday, citing sources, that the company was warned by regulators to delay the initial public offering (IPO) and examine its network security.

"And if the crackdown was indeed planned months that would imply that it's not going away soon, which might explain the large share price correction," Singh added. Didi said on Monday the app's ban would harm its revenue in China despite it remaining available for existing users. It also told Reuters it did not know about the investigation before the IPO.

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.

A sharp sell-off in Didi shares would further dent the confidence of its investors, who were shocked by the announcement of a probe into the ride-hailing firm just two days after its New York stock market debut. "I think 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.

Invest did not participate in Didi's IPO.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)