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June 2022
AAM Magazine
June 2022
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Analysis: A question mark over DiDi’s US delisting

By Paul Mackintosh   
April 27, 2022

DiDi Global Inc.’s announcement on April 16 of an EGM, scheduled for May 23, to vote on delisting from the NYSE looked at first like the long-awaited fulfilment of rumoured Chinese government plans to delist leading Chinese businesses from the US – and of US congressional pressure to get them out. Is it so?

For one thing, the China Securities Regulatory Commission (CSRC) immediately said that DiDi’s decision had nothing to do with ongoing tensions with the US over auditing of US-listed Chinese firms, and was entirely based on its own business and market conditions. That rather makes you wonder if a prompt Chinese official denial is some kind of euphemism for a much shorter three-letter word. Consider, for one thing, the expense, waste and loss of face involved in delisting after less than a year. Most companies would surely be likely to tough it out.

The US side doesn’t look to be holding out any olive branches, though. On April 21, the Securities and Exchange Commission added 17 more US-listed Chinese companies to its list of potential delisting candidates for failing to provide full audit information, the crunch issue in the US-China faceoff over Chinese companies listed in the US.

Recent Chinese comments around the issue had suggested that it might be resolved positively; and stocks of US-listed companies like Alibaba and Baidu had risen on such prospects. After the SEC’s latest decision, sources close to the CSRC immediately said that the action was anything but positive.

At this point, the whole issue may become academic. Assume that the SEC’s action was just a blip, and that it may be ready to compromise on auditing US-listed China businesses. Assume that Beijing is completely happy with Chinese businesses listing in the US. But after DiDi’s debacle, what self-respecting Chinese business would want to? As of its announcement, DiDi’s stock had already fallen 61% year to date. That doesn’t sound like a very rewarding environment.

Then there’s the wholesale rerating of tech stocks, which is a separate but connected story. As of April 24, Chinese technology stocks as a whole have fallen some 60% since their 2021 peak. But plenty of US tech companies have lost 75% or more on their year-to-date peaks.

With rising inflation, geopolitical tensions and supply chain disruptions, the public markets don’t look likely to recover their buoyancy any time soon. This may give US-listed Chinese companies excellent cover to withdraw without too much loss of face. A shame for their investors, though.