Following a crackdown on the Chinese ride-hailing giant Didi Global in China, US shareholders of the company sued it which resulted in a slump in its shares.
It was just a week ago that the company had made a debut at New York Stock Exchange. Since the company was ordered by a Chinese regulator to pull its app from app stores, the US market value of the company has fallen by more than 20 per cent. The company’s app was accused in China of illegally collecting personal data of users.
Did had not disclosed the ongoing talks it was having with Chinese authorities about its compliance with cybersecurity laws and regulations, said the lawsuits which were filed in federal court in New York and Los Angeles.
Didi’s chief Executive officer Will Wei Cheng and several other executives and directors were named as accused in the complaints. The law suits also named as defendants the lead underwriters for the company’s share sale – Goldman Sachs, Morgan Stanley and JPMorgan Chase.
An investigation into Didi was announced by China’s Cyberspace Administration of China (CAC) announced on 2 July while the company had launched its US IPO only a few days earlier. The CAC ordered Didi to pull its app from smartphone app stores a couple of days later.
In its response, Didi has said it will “strive to rectify any problems”.
The IPO of the company was the second-biggest ever US initial public offering (IPO), which raised $4.4bn, for a Chinese company but the market value of the company dropped by about 415bn on Tuesday alone.
According to reports earlier, the company had been asked by Chinese regulators as long as three months ago to postpone its IPO because of cybersecurity concerns.
Warnings about the ability of potential investors to protect their “rights through US courts may be limited, because we are incorporated under Cayman Islands law” were mentioned by Didi in its prospectus which was made available ahead of the IPO.
Some of the regulatory risks to its operations were also mentioned in the document but the company had provided no indication that an investigation against it by the CAC and the possibility of the company taking on new users.
Founded in 2012, Didi is particularly popular in China’s cities. On average, more than 20 million rides are arranged in the country through the app every day.
Chinese regulators are on a mission to reign in the market domination related malpractices of home grown tech giants and Beijing said earlier this week about its intention of stepping up supervision of Chinese firms listed off-shore.
(Adapted from BBC.com)