(CapitalWatch, Sept. 20, New York) Co-founder and president of Didi Global Inc. (NYSE: DIDI) is said to be stepping down amid a troubled time for China's top ride-hailing giant.
Jean Liu has told some associates that the Chinese government is taking over Didi and will bring in new management, as Reuters reported, citing unnamed sources. This comes despite the company's denial of the earlier Bloomberg report that said Beijing's municipal government is attempting to take control of Didi through investments.
The news today sent the stock in DIDI down nearly 7% in early trading. The drop is exacerbated by the markets' sharp plunge on Monday as panic has risen over the Evergrande debt crisis and its potential impact on market stability. By mid-day, the Dow (DJIA) was down 700 points, the S&P 500 (SPX) dropped 2%, and the Nasdaq Composite (COMP) fell 2.6%. In Asia markets, the Hang Seng (HSI) lost 831 points, 3% in the red.
However, some analysts say it's more than just Evergrande that's weighing on the U.S. benchmarks, saying it's been time for a correction after the long rally. "This market has experienced almost no downside volatility for a long time and a pullback was long overdue," said The Bahnsen Group's David Bahnsen, as cited by CNN Business.
As to Didi, which once was the most anticipated Chinese listing in New York – its post-IPO run has been pretty much a flop. Now at $7.70 a share, the ride-hailing company's stock has been volatile since the $4.4 billion IPO in late June as Chinese regulators have launched probes into Didi with expected punishing measures to follow.
Apparently, Beijing saw Didi's listing as a confrontation after the Cyberspace Administration of China warned the company against going public overseas in relation to its handling of sensitive user data. In the months that followed, several regulatory branches, including cybersecurity, state and public security, transport, tax, and natural resources have scrutinized Didi – and some market surveyors expect the company to be hit harsher than Alibaba Group (NYSE: BABA; HKEX: 9988).
The latter has been hit with numerous fines, the largest at $2.8 billion, and forced to correct certain operations, such as end the forced exclusivity agreements with its merchants. Alibaba's fintech arm, Ant Group, is still reeling from the forced restructuring and divestiture, now also to accept some state-control – the full outcome of which investors may see in its "revived" initial public offering.
On Monday, Didi again denied the reports. The company told Reuters it was "actively and fully cooperating with the cybersecurity review. Reuters' rumors about management changes are untrue and unsubstantiated."