Chinese ride-hailing company Didi Global intended to defraud investors in raising more than $4.4 billion through its initial public offering (IPO) on the New York stock exchange in 2021, a US court ruled on Thursday.
The company must face a lawsuit brought on by investors for concealing and disobeying a Chinese government order to postpone the contentious IPO, the US District court added.
Didi pushed ahead with its share sale in June 2021, which gave it a valuation of $73 billion, despite Beijing’s orders that it must first address cybersecurity and privacy concerns on cross-border data flows.
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A month before the IPO, China’s market regulator had also launched an antitrust probe into Didi, to investigate whether the firm used any competitive practices to squeeze out smaller rivals unfairly.
The regulator was also probing whether the pricing mechanism used by Didi’s core ride-hailing business was transparent enough.
Angered by Didi’s listing, despite those concerns, China’s cyberspace regulator, the Cyberspace Administration of China, banned the firm from registering new customers, two days after the IPO.
It also ordered the removal of the Didi Travel app from smartphone app stores.
Shares of Didi on NYSE tumbled as much as 25% in the first US trading session following the regulatory crackdown.
In December 2021, Didi announced it would delist the US-listed shares. By March 2022, Didi’s shares were trading 87% below their IPO price.
China’s regulator fined Didi $1.2 billion in July 2022 over the episode. The firm’s market value is now about $19 billion, according to LSEG data.
In a 54-page decision, US District Judge Lewis Kaplan said Didi’s alleged desire to sell American depositary shares before a looming government crackdown on Chinese technology companies gave the company and various officials a “concrete and personal economic motive” to go public before “the window for high valuation Chinese IPOs in the United States” closed.
Kaplan also refused to dismiss claims against banks that helped Didi go public.
- Reuters, with additional inputs from Vishakha Saxena
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