Facing intense pressure from the Chinese government, shares of Chinese online taxi platform DDT fell sharply after the opening bell on Tuesday (July 6), dropping as much as 23 percent. Sources said Drip may be forced to exit the U.S. stock market.
What has happened to Drip since its U.S. IPO on June 30 has been a real setback. Less than two days after the IPO, Chinese regulators announced a cybersecurity review, and two days after that, China’s Internet Information Office ordered application stores to take down the Drip application, while Drip’s new customer registrations were ordered to be suspended, literally beating Drip to death.
Drip’s stock was priced at $14 a share and rose as high as $18 a share after the IPO. But on Tuesday, the stock fell to $11 a share. The sharp drop in Drip’s stock has led to a series of legal battles, and some law firms are preparing to launch a class-action lawsuit against the company.
Drip, which raised nearly $4.4 billion in its U.S. IPO, was valued at a peak of $73 billion, the highest amount raised by a Chinese company in the U.S. since Alibaba Group went public in 2014.
Drip is known as China’s “Uber,” with 15 million drivers and nearly half a billion customers, making it a veritable leader.
Amid growing tensions between the U.S. and China, the Chinese side appears to be very concerned about the U.S. push to de-Chineseize and decouple its global supply chain from China’s intentions. According to internal Chinese sources, the response developed by the highest authorities in Beijing is to try not to give up overseas markets while trying to expand the dependence of Western countries, including the U.S., on the Chinese economy, thus defusing the White House’s decoupling plan.
So, despite the intense U.S.-China decoupling contest in several areas, the number of Chinese companies listed in the U.S. stock market has increased rather than decreased. The listing of DDT appears to be the latest move by Beijing to implement this strategy. But the reaction of the Chinese government authorities after the listing of DDT was surprising, and the real reason behind it is suspicious.
Initially, there was widespread speculation that Chinese authorities were punishing Drip because it had agreed to package Chinese road data and user data to the United States in order to be allowed to list overseas. But Drip was quick to deny it, saying “domestic user data is stored on domestic servers, and there is no way that data could be given to the United States.”
The official Chinese reason for censoring DDT was for cybersecurity. China’s National Cyber Security Review Office said the purpose of the review is to identify and avoid risks and hazards to the operation of critical information infrastructure from the procurement of products and services at an early stage, to safeguard the security of the critical data infrastructure supply chain and to maintain national security.
But in fact, according to Chinese media sources, Chinese regulators interviewed Drip executives before it went public in the U.S., hoping that Drip would not go public in the U.S. for data security reasons. But Drip ignored this, and instead used the timing of the Communist Party’s centennial celebration to go public in the U.S., causing a preemptive strike.
The BBC’s report also points out that, unlike Alibaba, which was fined by China’s General Administration of Market Supervision under the Anti-Monopoly Law, the State Internet Information Office of China (SIIC) issued the fine to Drip, based on the Network Security Censorship Measures.
The BBC believes that Drip has ignored the admonition to go public in the US. It even chose to go to the U.S. before the Communist Party’s centennial celebration, hoping to “pre-empt” the announcement, which made Chinese regulators even more furious.
Chinese media quoted sources within China’s National Cyber Security Review Office as saying that the regulatory authorities would impose harsher penalties on Drip and that Drip would likely be forced to announce its exit from the U.S. stock market. If that happens, Drip would become the first Chinese company to announce its exit from the U.S. market soon after listing.