Chinese Ride-hailing Giant Under Pressure After App Removal, Share Price Slump

Credit: China Visual Group

BEIJING, July 10 (TMTPOST) – Existing users of China’s biggest ride-hailing company Didi Chuxing are feeling relieved in the wake of an additional body blow to the company from China’s cybersecurity regulator.

The Cyberspace Administration of China (CAC) on Friday said it would remove 25 apps operated by Didi Chuxing from mobile app stores, saying they used personal data that was illegally collected.

“I had thought all Didi services were suspended across China. I am glad that I can still use it after a series of measures targeting Didi,” said Daisy Li, who left her office for home after midnight on Friday. “I will continue to use Didi if its services are cheaper than those of its small rivals.”

“But I feel sorry for those who have not signed up for it,” said Li, adding that they may never have a chance to use Didi.

Another user Jasmine Zhong said that she would switch to other ride-hailing apps if Didi no longer provides convenient and inexpensive services.

The apps newly targeted include those for Didi’s drivers offering rides through its platform, and for delivery service, camera device and finance service, among others, according to a list posted on the CAC’s Wechat official account.

No websites or platforms shall provide access and download services for the 25 apps to be removed, including “Didi Travel” and “Didi Enterprise Edition”, the administration said.

The move is the latest in a series of big blows to Didi, which has been at the center of sell-off on the US stock market since an earlier order by the Chinese government to remove its main app from China’s online app stores.

The company, along with several other Chinese big tech companies, on Wednesday was also snapped with a RMB500,000-fine for violating the country’s anti-trust law.

US-listed Chinese stocks fell on the fifth day in a row on Thursday, with nearly 78% of them witnessing a drop in prices, amid investors’ worries about a sustainable global economic recovery and China’s crackdown on a number of Chinese firms over cybersecurity and other concerns.

Shares of Didi plunged to 11.22 U.S. dollars Thursday, down 32.61% from 16.65 dollars apiece when it began trading in its US market debut on June 30, an evaporation of 26 billion dollars of its market value.

The share price slump is reportedly triggering collective lawsuits against the company by US-based shareholders.

App Removed Over Cybersecurity Concerns

The Cyberspace Administration of China (CAC) on July 4 required online mobile app stores to take ride-hailing app Didi Chuxing off their shelves, citing cyber security concerns.

Two days earlier, the CAC announced it had launched a review of Didi. During the review period, new user registration would be suspended “to prevent the expansion of risks.”

The CAC said in a statement the Didi app seriously violated laws and regulations, and the decision to remove the app was made in accordance with China’s Cybersecurity Law.

Didi should rectify its problems to comply with laws and national standards and protect the safety of its users’ information, the CAC said.

Didi has suspended new users registration since last Saturday. Those who had already downloaded the app can still use it normally, meaning that existing users, both passengers and drivers, are not affected.

Didi in a response promised to “strive to rectify any problems.”

Analysts said the app removal further underscored Chinese regulators’ resolve to crack down on illegal activities on on-line platforms and enhance the protection of personal information.

The move came on the heels of Didi’s June 30 US market debut. The stock started trading at 16.65 dollars per share, up nearly 19 percent from its issue price, and closed at 14.14 dollars apiece on the first trading day.

Didi Reportedly Sued by Investors After Share Plunge

Didi is reportedly being sued by US shareholders due to the slump in the company’s share price.

The lawsuits, filed in federal courts in New York and Los Angeles, said Didi failed to disclose its ongoing talks with Chinese authorities about its compliance with cybersecurity laws and regulations, according to Bloomberg.

Didi’s chief executive officer Jean Liu, several other executives and directors were named as defendants. The lead underwriters for Didi’s share sale, including Goldman Sachs, Morgan Stanley and JPMorgan Chase, were also among the defendants, according to the report.

Didi listed several risks factors associated with doing business with a Chinese firm subject to Chinese regulation in its IPO prospectus, but the suits said the company failed to highlight its ongoing talks with Chinese regulators, the report said.

The company didn’t immediately respond to a request for comment, it said.

Didi Fined RMB500,000 For Anti-trust Violation

China’s market regulator on Wednesday dished out 22 fines of RMB500,000 each to the country’s big tech companies, including Didi Chuxing, Alibaba Group Holdings and Tencent Holdings, for a series of irregularities related to merger deals over the past decade.

The State Administration of Market Regulation fined the companies for not seeking approval in 22 deals. Though the RMB500,000 fine is trivial to the tech giants, it’s the maximum amount allowed for merger deal transgressions under China’s anti-trust law.

Subsidiaries of Didi are involved with eight of the 22 fined deals. In one of the cases, it established a joint venture without reporting the deal for antitrust reviews before the company’s registration, according to reports.

Alibaba accounts for six cases, Tencent five, on-line retailer Suning two and Beijing Sankuai Technology, a Meituan-affiliated company, one.

The fine could be seen as the third big blow to Didi, after the suspension of new user registration and the app removal of Didi, which combined to send Didi share prices down.

Didi has warned there will be an adverse impact on its revenues after its app was removed from Chinese stores. If its stock prices continue to fall, Didi may be forced to exit the US stock market, according to reports.

China Tightening Supervision on Overseas-listed Companies

China will tighten oversight of overseas-listed Chinese firms and data security, the Chinese government said in a statement on Tuesday.

New measures include improving regulation of cross-border data flows and security, cracking down on illegal activity in the securities market and punishing fraudulent securities issuance, market manipulation and insider trading.

So far this year, 37 Chinese companies have been listed on the US stock market, according to statistics by Bloomberg.

Didi, founded in 2012, provides a wide range of app-based services across Asia Pacific, Latin America and Africa, as well as in Central Asia and Russia, including ride hailing, taxi hailing, chauffeur, bike-sharing and other forms of shared mobility.

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