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Investing.com – Didi Global (NYSE:DIDI) stock looked like extending the previous session’s losses on Wednesday, on rising concerns over the fate of American investments exposed to Chinese regulatory actions.
Didi shares were down more than 3.5% in premarket trading. They closed at $12.49 on Tuesday, 19.6% lower from Friday. The shares were issued at $14 apiece and had listed on the NYSE just last week.
Chinese regulators have increased the scrutiny of their firms listed on U.S. exchanges on concerns over the end-use of the large trove of consumer data they hold.
In its brief statement on Tuesday, China’s State Council said rules for overseas listings will be revised and publicly-traded firms will be held accountable for keeping their data secure. It also said China will step up its regulatory oversight of companies trading in offshore markets.
As many of those firms are listed on the Nasdaq or the NYSE, Chinese authorities are concerned over the quality and quantum of data these companies are required to share with the Securities and Exchange Commission and other American bodies to comply with the listing norms.
An outcome of that fear has been Chinese regulators asking the internet companies not to onboard new customers and going so far as to tell store apps like WeChat and Alipay to take them off their platform.
Chinese companies have listed abroad outside of regulators’ purview largely through the Variable Interest Entity model. Beijing has never really endorsed it, despite the system being used by virtually every Chinese tech giant to tap foreign investors. Under the structure, corporations transfer profits to an offshore entity with shares that foreign investors can then own.
A Bloomberg report said regulators in Beijing are planning rule changes that would allow them to block a Chinese company from listing overseas even if the unit selling shares is incorporated outside China. The rules may also require VIEs that have already gone public, like Alibaba (NYSE:BABA) Group Holding Ltd., to seek approval for stock placings offshore, the people said.
