China watchdog casts its gaze on Didi, sending stock tumbling days after IPO

A major regulatory body in China said Friday it was investigating domestic ride-hailing giant Didi Chuxing, just two days after its blockbuster public debut on the U.S. stock market.

The Cyberspace Administration of China, an internet watchdog group, said it would review Didi’s cybersecurity risks in the interest of safeguarding national data security. It did not say how long the review would last, and Didi will not be able to register any new users throughout the course of it.

Didi’s stock, which trades on the New York Stock Exchange, tumbled more than 8% midday Friday following the news.

Didi’s IPO was one of the biggest and most-hyped of the year, debuting Wednesday at a valuation of nearly $70 billion. However, its success was tempered by concerns that it could face a crackdown from Chinese regulators, who have begun to target domestic internet titans in the past year. In April, Didi was among nearly three dozen tech companies hauled in by the government to reaffirm anti-monopoly rules and pledge to “put the nation first.”

Now it’s possible that some of those fears are being realized. Last month, Reuters reported that China’s State Administration for Market Regulation was investigating whether Didi employed anti-competitive practices, as part of a broad antitrust probe spanning major platforms including Tencent and Alibaba.

Amid the current events, the specter of Jack Ma’s behemoth Ant Group looms large; the financial services company was set to raise $34 billion as the world’s biggest IPO in October 2020, until Chinese president Xi Jinping personally scuttled the listing over Ma’s criticisms of state regulation, the Wall Street Journal reported. After several months in limbo, it was revealed earlier this year that Ant Group would be morphed into a financial holding company supervised by China’s central bank.

“DiDi will fully cooperate with the relevant government authority during the review,” the company said when reached for comment. “We plan to conduct comprehensive examination of cybersecurity risks, and continuously improve on our cybersecurity systems and technology capacities.”

It currently operates in 17 countries and has expressed aspirations to become a “truly global” company. Per its most recent figures, more than 90% of its sales are made in China.