Bloomberg News previously reported that Chinese regulators are considering severe, perhaps unprecedented, sanctions on Didi, including forcing him to step off the list.
Didi Global Inc. jumped after The Wall Street Journal reported that the company was considering pulling out to appease Chinese regulators and compensate investors for the losses.
The Beijing-based company is in discussions with key bankers, regulators and investors on ways to resolve regulatory issues since its difficult listing, the newspaper said, citing people with knowledge of the matter. One of the options could involve a takeover bid for the listed shares, according to the report.
The stock climbed 49%, but then slashed its earnings after Didi said on his social media account that the information about his privatization was false.
Bloomberg News reported last week that Chinese regulators were considering severe, perhaps unprecedented, sanctions on Didi, including forcing him to step off the list.
Beijing is likely to impose tougher penalties on the rideshare company than on Alibaba Group Holding Ltd., which swallowed a record fine of $ 2.8 billion after a months-long antitrust investigation and agreed to take measures to protect traders and customers, people familiar with the matter said.
Regulators are assessing a range of potential sanctions, including a fine, the suspension of certain operations or the introduction of a public investor, they said.
By Thursday, Didi shares had fallen more than 36% from their offer price, after Beijing announced an investigation of the company and cut its services from Chinese app stores. U.S.-traded stocks rose 14% when the market opened in New York.
What Bloomberg Intelligence Says:
Privatizing Didi at or near its IPO price, a possibility pointed out by Dow Jones, may be, in our view, the best way for the company to resolve its regulatory issues and appease investors. Privatization would allow Didi to sidestep regulatory concerns from the public and could potentially lead to a listing in a location perceived by Chinese regulators to be more favorable to sensitive companies, such as Hong Kong.
– Matthew Kanterman and Tiffany Tam, analysts
A buyout offer could be funded in part or in large part with money Didi raised from investors during the IPO, the Journal said. The price the company would offer investors has not yet been determined, but it could be around or above the IPO price of $ 14 per share, according to one of the people in the report. The company had started considering a privatization plan in mid-July.
China’s Cyberspace Administration supports the privatization plan in principle, one of the people quoted by the Journal said. It is unlikely that SoftBank Group Corp. helps fund a deal, the person said. Representatives from Didi, SoftBank, CAC and the banks did not immediately respond to the Journal’s requests for comment.
Regulators are evaluating a range of potential sanctions, including a fine, the suspension of certain operations or the introduction of a public investor, Bloomberg reported last week, citing people with knowledge of the matter. A delisting or forcible withdrawal of Didi’s U.S. shares is also possible, although it is not clear how such an option would play out.
Regulators had broadly supported the idea of an IPO, but they have expressed concerns about Didi’s data security practices since at least April, the people said. They urged Didi to keep his data safe before proceeding with the IPO or moving the location to Hong Kong or mainland China where the risks of disclosure would be lower, the people said. While regulators did not explicitly ban the company from going public in the United States, they felt Didi understood the official instructions, they said.