Beijing wants to force tech companies to withdraw from the stock market

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It would be the biggest blow to date in the Chinese government’s campaign against the domestic internet industry, which has lasted for more than a year: according to the “Bloomberg” news agency, the Chinese carpool service Didi, which raised $ 4.4 billion from investors when it went public on the New York Stock Exchange (NYSE) this summer, is again delisted on Beijing’s orders.

After its IPO on June 30, Didi was valued at $ 68 billion, about $ 13 billion less than its US competitor Uber is currently worth in the capital market. Yet the Chinese Communist Party, which celebrated its 100th anniversary a day later, did not find the Beijing-based tech company’s success worth celebrating.

Regulators have previously reported concerns that by going public in the United States, the U.S. government may gain access to data on passengers, destinations and video footage of Didi taxis in China. Didi would not have paid much attention to the warnings. Two days after the IPO, the Chinese government subsequently banned the service from any new companies and removed the Didi app from app stores in China, after which the newly listed company’s stock price. listed on the NYSE fell.

Later, government officials from various agencies and ministries gained access to the company’s headquarters for an investigation into the “cybersecurity” of Didi’s business. There was speculation in China that the company was facing an “unprecedented penalty.”

According to the “Bloomberg” report, this could be even higher than expected. The group’s top executives had been ordered by regulators to develop a plan to delist from the New York Stock Exchange, the report said. Investors must be offered at least $ 14 per share for a buyback, the issue price at the time of the IPO. However, it is also conceivable that the company could be re-listed on the Hong Kong Stock Exchange after delisting in New York.

Asian capital markets reacted quickly to Friday morning’s news. On the Tokyo Stock Exchange, the share price of the conglomerate Softbank, which owns more than 20% of Didi, lost 5% in the early afternoon. Because investors interpret the action against Didi as another blow to the Chinese tech industry as a whole, the country’s other major internet companies have also lost ground.

Tencent’s share price on the Hong Kong Stock Exchange, for example, fell more than 3% in the afternoon. Alibaba’s share price also lost a similar amount. Meituan, a delivery service where food can be ordered from more than 1,000 Chinese, even fell more than 4%.

In fact, most observers assume that the Chinese government’s campaign to regulate tech companies, which until recently were extremely powerful and constantly privately owned, is far from over and is only gaining momentum. magnitude. One can only speculate as to why Beijing accepts that successful companies lose tremendous value and be virtually crippled by harsh state intervention since virtually nothing leaks from management, which operates exclusively in secrecy.

However, one can infer from speeches by Head of State Xi Jinping, editorials in the party press and the government’s five-year plan presented in the spring that the influence of internet companies on the daily lives of the 1.4 billion Chinese has become too important for the CP and that companies must be placed under de facto state control. Moreover, according to Xi’s vision, technology providers are investing in the wrong areas.

The head of state is clearly not happy that the innovative power of Alibaba, Didi & Co. has so far produced business models that allow companies to make money from the consumption of Chinese consumers. Xi, however, wants tech companies to develop hardware like semiconductors. Since China has so far not been able to produce competitive high-performance chips, it has to buy them from the United States, among others.

In the case of smartphone maker Huawei, which Washington cut from American chips, it highlighted the People’s Republic’s vulnerability in the trade war. Therefore, in order to achieve self-sufficiency, the party drew up a plan for a “double cycle”. This means that the Chinese state and the private sectors are expected to develop advanced technology globally as part of a joint national effort.

Beijing began showing how private internet companies should align with the party last fall. At the time, he canceled the IPO of financial services firm Ant Financial almost at the very last minute after founder Jack Ma publicly criticized the government for regulating it too tightly. The share price of Ant’s parent company Alibaba has since lost 56% of its value to date. Shares of game developer Tencent, which the party accused in the spring of demeaning Chinese youth and acting monopolistically like Alibaba and other internet companies, have since fallen nearly 40%.


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