Didi will soon end his American journey. The carpooling group will change its list from New York to Hong Kong. Where this $ 38 billion tech company goes, more will follow. Beijing is extremely serious in pushing Chinese groups listed in the United States to bring their lists home.
Strengthening the status of Chinese trade is not Beijing’s only goal. China is concerned that local companies represented in America will give the United States access to sensitive information. Mistrust is mutual. Big data is now a strategic resource.
More than 240 Chinese companies worth more than $ 2 billion are listed in the United States. Since July, Beijing has halted nearly all IPOs by data-rich Chinese companies. Those who have already registered are likely to return home.
An even larger proportion, about three-quarters by market value, face uncertainty because of their status as “variable interest entities” listed in the United States. These Cayman-registered shell companies bypass Chinese foreign ownership rules for mainland companies. Beijing has stepped up monitoring of VIE structures, which are used by groups such as Alibaba, Pinduoduo and JD.com.
The US Securities and Exchange Commission has, for its part, finalized a rule allowing it to write off foreign stocks that do not meet its audit requirements. US regulators are frustrated by Chinese peers’ refusal to show them audits of Chinese companies. Chinese companies listed in the US have struggled to comply with US requests for information without violating Chinese laws.
The timing for Didi’s Hong Kong change seems unfortunate. Registrations in the city have raised less than $ 26 billion this year, down more than a fifth from last year’s total. The appetite of Chinese retail investors for such homecoming has faltered as politicians ramp up the pressure on business. The latest Chinese company to be listed in Hong Kong, music streaming platform Cloud Village, debuted Thursday even after cutting supply in half.
Didi shares soared and then collapsed in pre-market trading. Experts have theorized on everything from buyouts to a business boost for the party-loving Didi. The more politicized stocks become, the more difficult they are to value on fundamentals. Welcome to the polarized and rumored world of international investing.
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