Fresh from U.S. IPO, Drip is under security scrutiny in China

An executive at Chinese online taxi giant Drip Global said Saturday (July 3) that it is “absolutely impossible” for the company to pass data to the United States, as all Chinese user and road data is stored on servers in the country.

Li Min, vice president of Drip, also said the company will file a lawsuit against anyone who claims on any social media platform that Drip passed data out during its initial public offering (IPO).

Just two days after Drip began listing on the New York Stock Exchange, China’s Internet Information Office announced Friday that it had launched an investigation into Drip to protect national security and public interest.

News of the investigation by China’s State Internet Information Office (CAC) and the agency’s decision to block Drip from registering new users during the investigation caused Beijing-based Drip’s shares to fall 5 percent Friday.

In a post on Weibo, Li Min said, “Like many Chinese companies listed overseas, Drip stores all domestic user data on servers in China and there is absolutely no way that data could be passed on to the U.S.”

Drip, which offers services in China and more than 15 international markets, collects massive amounts of real-time mobile data every day. It uses some of that data for self-driving technology and traffic analysis.

The company, founded by Cheng Wei in 2012, is already facing regulatory investigations in China over safety and its operating licenses.

I’m not sure what the ultimate impact might be, but the regulatory crackdown has been an ongoing concern even before the IPO, and Drip has been summoned twice by regulators,” Sumeet Singh, head of research at Aequitas, told Reuters on Saturday ahead of Li Min’s Weibo post. “

“Stopping the company from taking on new users this time shouldn’t hurt much, as the company already has more than 80 percent market share, as long as that time isn’t prolonged.”

The net regulator did not say how long the investigation would last, nor did it provide any other details.

Drip said Friday that it plans to conduct a comprehensive review of cybersecurity risks and will cooperate fully with relevant government departments. It also said it was operating normally, except for a suspension of new user registration in China.