William John Market Report 07-07-21
DiDi shares plummet in early morning trading after the American Bank Holiday on Tuesday, William John examines why.
William John, equities, capital markets, IPOs, regulation, William John Capital Bonds, William John Holdings Ltd,
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William John Market Report 07-07-21

William John Market Report 07-07-21

Category: Reports

On 06/07, Didi Chuxing or “DiDi”, a Chinese vehicle hire company with over 550 million users across 400 cities (per businesswire.com), took a significant hit to its market capitalisation value on the New York Stock Exchange (NYSE) with its share price falling approximately 20 per cent as of 12:45pm EDT (Eastern Daylight Time):

Source: William John Analytics, Yahoo Finance. Last price on 06/07 observed at 12:45pm EDT.

Due to the American Bank Holiday for Independence Day Weekend, the NYSE was shut from 03/07 through 05/07. However, there was a sharp fall in valuation on Tuesday’s early morning trading. It is likely this has occurred because of Chinese regulators imposing a series of measures on the company since its IPO last week, where it raised up to $4 billion in capital on an opening trading price of $14.00. 

Such measures have included the Cyberspace Administration of China (an internet watchdog) ordering the company to stop signing up users and delisting the company from domestic app stores. It is believed that Chinese regulators are becoming increasingly concerned with overseas listings of Chinese companies as they look to secure data vital to national security, such as the data collected on the movements of hundreds of millions of Chinese citizens. It has further come to light that prior to the IPO, the company was asked to consider listing on the Hang Seng in Hong Kong as opposed to the NYSE to raise capital as Hong Kong falls under Chinese jurisdiction, according to the Financial Times. 

Such sanctions have damaged investor sentiment about the company, and it is now feeling the consequences with a much-depressed market capitalisation. Unsurprisingly, other Chinese companies listed on the New York Stock Exchange have also seen devaluations since their IPOs. For example, RLX Technology, China’s largest e-cigarette manufacturer, has lost 72.7% of its share price value since its IPO on 18/01 (as of 1:09PM EDT on 06/07) after Chinese regulators drafted regulation classifying the products as tobacco products in March. 

Sadly, these disastrous IPOs come at a time whereby fundraising on U.S. capital markets by Chinese companies is at a near record high. According to data released by Dealogic, 34 companies raised $12.4 billion in New York floats alone in the first half of 2021. 

If Chinese regulators continue to apply legislative and regulatory pressure over the coming months and years, it is likely Chinese companies looking to tap the capital markets in the future will have no choice but to consider listing on Chinese or Hong Kong domiciled stock exchanges. This will be in order to safeguard their share valuations from inevitable scrutiny and strong-arm tactics from regulators which has ravaged U.S. listed Chinese companies so far. 

Any opinions expressed in these documents are those of William John and are provided for information only. E&OE.