DiDi Global Inc. (DIDI) stock prices were down 2.06% as of the market closing on July 15th, 2021, bringing the price per share down to USD$12.36 at the end of the trading day. Subsequent premarket fluctuations have seen the stock fall 6.96%, bringing it down to USD$11.50.
CAC Investigation
July 16th 2021 saw the Cyberspace Administration of China (CAC) report that officials from at least seven departments initiated the conducting of a cybersecurity review of DIDI, having sent officials on July 16th, 2021. The regulatory officials included the CAC, Ministry of Public Security, Ministry of State Security, Ministry of Transport, Ministry of Natural Resources, State Taxation Administration, and State Administration for Market Regulation.
Government Involvement
With the CAC not offering many details in its statement, the involvement of the myriad of government agencies signals the heavier regulatory pressure on the company, which will celebrate a decade of being in business in the upcoming year. The Chinese government is in the process of revamping its policies in regard to the privacy and data security. This includes the drafting of a Personal Information Protection Law, which will see tech platforms being required to impose stricter measures to ensure secure storage of user data.
New Legislation
September 2021 will see China implement its new Data Security Law, which will require companies that process “critical data” to conduct risk assessments and submit reports. The regulations will also call on organizations that process data affecting the country’s national security to submit annual reviews. The company currently has a market cap of around USD$60 billion and is reported to store all of its Chinese user and road data in China.
DIDI IPO
The Cyberspace Administration of China launched the data-related cybersecurity investigation into the company two days after its IPO. The New York initial public offering saw the company generate USD$4.4 billion in the capital. Furthermore, the company was ordered by the regulators to remove its application from the market space in China. This is expected to negatively affect the company’s revenue, despite the app continuing to be used by users who already had it downloaded.
Future Outlook for DIDI
With the Chinese government cracking down on companies like DIDI, shareholders are concerned about the future prospects of the commercial potential of their investments. The company is keen to comply with the newly announced regulations in a bid to consolidate its market footprint and mitigate the losses expected.
