China's biggest taxi service DiDi Chuxing was asked by the country’s cybersecurity watchdog to delay its initial public offering (IPO) in the US, a report said. DiDi was also told to conduct a thorough self-examination of its network security, according to people familiar with the development.
The IPO was listed in the New York Stock Exchange (NYSE) on June 30. This is the second-biggest IPO from a Chinese company after the Alibaba Group Holding Limited.
The Wall Street Journal report stated that despite the warning to delay the IPO, DiDi went ahead as it was facing increasing investor pressure for a big payout. However, reports suggest the ruling Communist Party did not approve of the listing.
DiDi is the third company to face the brunt of the party. Earlier, it was Full Truck Alliance Company and Kanzhun Limited, and the Ant group. China had fined Jack Ma's Alibaba Group $2.8 billion for antitrust violations after pulling the plug on a $34 billion initial public offering by affiliate company Ant Group.
The Cyberspace Administration of China (CAC) launched an investigation into the Chinese ride-hailing giant two days after it was listed on the stock exchange. DiDi’s app has been suspended since the investigation is pending. Company officials have assured full cooperation in the probe.
The CAC said that it was conducting a cybersecurity review of DiDi to 'prevent data security risks, safeguard national security, and protect public interest'. The company has also been accused of wrongful collection and use of customer data. So far, it has not been disclosed if a penalty would be levied on the cab service app.
DiDi said the suspension of the app may adversely affect its revenues in China. In its statement, the company said, it had no knowledge before its $4.4 billion listing that CAC would launch a probe and order its app to be taken down.
The WSJ report states that CAC has been apprehensive of the data falling into foreign hands as any public listed company is obligated to disclose information on being listed in the US.
As Reuters report, apart from CAC, China's State Administration of Market Regulation (SAMR) is also probing whether the taxi giant drove out smaller rivals by deploying anti-competitive practices and if the pricing mechanism of its business is transparent enough.
DiDi was founded by Will Cheng in 2012. It has the lion's share of the cab service market in China. In the fourth quarter of 2020, nearly 88 percent of all cab bookings went to DiDi.
However, the massive reach of DiDi may have also worked against the application, say experts as Beijing has been cracking down on the nation’s giant tech firms to curb their 'growing influence'.
(Edited by : Kanishka Sarkar)
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