Chinese rideshare company Didi sued in US as shares drop

Ng Shu-kei, Managing Director of Didi Chuxing Hong Kong, poses in a taxi in Jordan.

Ng Shu-kei, Managing Director of Didi Chuxing Hong Kong, poses in a taxi in Jordan.

Chinese ridesharing giant Didi Global is being sued by U.S. shareholders after a Beijing crackdown triggered a drop in its share price.

The two lawsuits come a week after Didi debuted on the New York Stock Exchange.

The company’s market value in the United States has fallen more than 20% since a Chinese regulator asked online stores to withdraw the app.

Beijing’s cybersecurity watchdog claims that the app illegally collected users’ personal data.

The lawsuits, which were filed in federal courts in New York and Los Angeles on Tuesday, say Didi did not disclose ongoing discussions with Chinese authorities over his compliance with cybersecurity laws and regulations.

The complaints named Didi’s general manager, Will Wei Cheng, and several other executives and directors. The main underwriters of the sale of the company’s shares – Goldman Sachs, Morgan Stanley and JPMorgan Chase – have also been named as defendants.

The Chinese Cyberspace Administration (CAC) announced on July 2 that it had started investigating Didi, which had launched its IPO in the United States a few days earlier.

Two days later, he ordered smartphone app stores to remove the company’s app from their platforms.

Didi said he would “make every effort to rectify any problem”, in a reply Monday.

The company, which saw its market value drop by around $ 15 billion (£ 10.9 billion) on Tuesday alone, made the second-largest initial public offering (IPO) ever in the United States for a Chinese company, with a fundraising of 4.4 billion dollars.

According to Bloomberg, who cited people familiar with the matter, Chinese regulators asked Didi to delay his sale of shares due to cybersecurity concerns three months ago.

In Didi’s prospectus, which was made available prior to the IPO, the company warned potential investors that their ability to protect their “rights in US courts may be limited, as we are incorporated under the Cayman Islands Law “.

The document also mentioned some of the regulatory risks to its operations, but gave no indication that the CAC would start investigating the company and prohibit it from accepting new users.

Founded in 2012, Didi is particularly popular in Chinese cities. On average, more than 20 million trips are organized across the country via the app every day.

Didi and JPMorgan did not immediately respond to a request for comment from the BBC. Goldman Sachs and Morgan Stanley declined to comment.

Who else is Beijing investigating?

Also this week, Beijing announced that it would strengthen supervision of Chinese companies listed overseas.

It established new guidelines indicating that watchdogs should improve cross-border cooperation on audits and update rules “on data security, cross-border data flows and other handling of confidential information. “.

Shares of Chinese parent companies listed in the United States, such as trucking company Full Truck Alliance (FTA) and job search platform Kanzhun, fell after the announcement.

The update follows China’s regulatory crackdown on a number of tech companies, from Alibaba to the Meituan food delivery service.

On Monday, ACC also said it plans to investigate the FTA. Like Didi, FTA recently debuted on the New York Stock Exchange, raising $ 1.6 billion (£ 1.1 billion).

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