According to the documents that Diddy submitted before the initial public offering, the Chinese Ride hailing platform There was no shortage A warning to investors that Beijing regulators are hovering.
After China’s Internet Regulators, Antitrust Observers, Tax Authorities Summoned it At the April meeting, more than 30 other Internet companies surveyed their businesses and “found many areas that seemed to be problematic from a compliance standpoint,” Diddy said. Diddy said he could not guarantee investors to avoid penalties, even if government officials conducted on-site inspections.
Those warnings barely hinted Sudden clamp down It shortened Diddy’s coming out party.
Diddy’s stock lost one-fifth of its value on Tuesday and fell again in its early trading in New York on Wednesday.The company was trading under 16% IPO price a week ago..
The plunge arose from a series of rapid actions taken by Beijing’s government agencies. There, top policymakers declared this week that they would aim to increase surveillance. Chinese companies like that Didi, Listed on overseas exchanges.
Just a few days after Diddy’s IPO, Chinese internet regulator We instructed the company to stop registering new users so that they can conduct cybersecurity reviews. The agency then ordered Didi’s app to be removed from the mobile store due to data collection concerns.
Then on Wednesday, Chinese antitrust authorities slapped other tech companies, including Didi and Alibaba. Moderate fine Because the merger transaction was not reported to the agency in advance. (Didi flagged the possibility of such penalties in the IPO disclosure.)
A Didi The representative declined to comment. The company said it was unaware of regulators’ plans for cybersecurity reviews and banning new downloads before they were released.
However, Jason Hsu, chief investment officer of Rayliant, an asset management firm that invests in Chinese securities, said Chinese regulators have usually discussed with companies the regulatory measures they are trying to take.
“Therefore, it seems that Diddy was aware of the possibility of a formal investigation in the future prior to the IPO,” Sue said.
The listing of the company was completed at a rapid pace. Didi submitted preliminary documents on June 10th. Two weeks later, it revealed the expected price range for the stock. The stock was trading less than a week later.
Without disclosing prior awareness of regulatory decisions that drive the market, Diddy and the banks that arranged the initial public offering (Goldman Sachs, Morgan Stanley, JPMorgan Chase) responded to US investor proceedings and regulatory issues. Can be vulnerable.
Bank and US Securities and Exchange Commission representatives declined to comment. Diddy is represented in the United States by Skadden, Arps, Slate, Meeger & Fromm, but didn’t comment immediately.
But data protection and network security aren’t the only fronts where Chinese authorities may be around Diddy. This means that companies, their investors, and their underwriters can face even more unpleasant surprises.
Daily business briefing
China’s antitrust authorities have accused corporate giants of abusing their size and market power, and have been scrutinizing the country’s Internet industry at an unprecedented rate in recent months. In april, it Alibaba fined $ 2.8 billionThe stock is also listed in the United States, blocking bazaar merchants from selling on other online platforms.
At the more local level, Diddy has been fighting with Chinese city officials for business and licenses for years. In its IPO filing, the company admitted that many Chinese drivers have not secured the licenses needed to provide ride-hailing services.With beijing ShanghaiFor example, dispatch drivers must be locals, but in both cities it is very difficult to register as a local to control population growth.
Also, “many” vehicles on the platform may not have the required vehicle permits, Diddy said in an IPO document. Vehicles used for online vehicle dispatch services in China must meet certain safety standards in order to obtain such a permit.
This week, China’s top policymakers announced that they would tighten regulations on foreign-listed Chinese companies, making it very likely that other Chinese regulators would decide to take action against Diddy. I am.Government Policy document The stronger capital market regulations announced on Tuesday should be combined with broader efforts to maintain national security and social stability, and how serious Beijing is now taking such issues. Indicates whether or not.
Wendy Ng, who studies Chinese competition law at the University of Melbourne, says that various Chinese government agencies generally consult with each other, even if they are not always fully coordinating the investigation of big companies such as Diddy. He said it was necessary. In some cases, other agencies may object if they believe the case is weak or if they believe that the subject of regulation is infringed.
“But at least for now, in this environment where locks appear to open and give regulators a green light to curb digital platforms, it seems much less likely that other regulators will resist.” Professor Ng said.
For example, if Chinese internet regulators determine that Diddy couldn’t protect your data, it could lead to an investigation into whether antitrust observers protected it to oppress rivals. The professor said.
“That’s exactly what antitrust regulators are talking about around the world. Can privacy breaches be evidence of abuse of control,” she said.
The United States seeks to strengthen its own rules for foreign companies listed on US exchanges. Washington lawmakers, who called on US regulators to give Chinese companies more power, have pointed out Diddy’s turmoil in support of their cause.
Florida Communist Party Senator Marco Rubio said in a statement in The New York Times: “Even if stocks recover, U.S. investors are still hindering the Chinese Communist Party from reviewing books by U.S. regulators. I don’t have any insight into the company’s financial strength. ” “It jeopardizes the investment of American retirees and desperately pours the necessary US dollars into Beijing.”
Rubio and Senator Bob Casey of the Democratic Party of Pennsylvania, Introducing the bill In May, failure to obey the full authority of US companies to oversee auditors will prevent Chinese companies from listing in the US.
Matthew Goldstein Contribution report. Alby Chan Contributed to the research.
Diddy’s regulatory issues may still be in their infancy
Source link Diddy’s regulatory issues may still be in their infancy