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It plans to file the required paperwork with the US Securities and Exchange Commission on or after June 2 in order to delist, Didi said in a statement Monday. Its shares whipsawed, falling as much as 13% in premarket trading before climbing 11% after the news.
The shareholder vote clears the way for the company to work with Chinese regulators who are demanding an overhaul of its data systems. That would allow the company to begin preparing for a Hong Kong share float, the best outcome investors have said they can hope for.
Didi’s biggest shareholders, which include Softbank (OTC:SFTBY) Group Corp. (TYO:9984), Tencent Holdings (OTC:TCEHY) Ltd. and Uber Technologies (NYSE:UBER) Inc., have watched Didi’s shares fall about 90% since going public, when it was valued around $80 billion. After delisting, the company will likely see its stock traded over the counter on the so-called pink-sheets market, home to penny stocks and other riskier businesses.
Some investors could be forced to sell because their mandates don’t allow them to hold unlisted shares. Hedge funds have already reduced their Didi holdings by 29% to about $231.9 million during the first quarter, according to a Bloomberg analysis of filings. Even those who are free of such mandates, such as SoftBank, may question whether it’s worth holding onto the shares given uncertainty over Beijing’s punishment, increased competition from smaller rivals and stalled expansion overseas.
It is still unclear what actual punishment awaits Didi, which has been in talks with the Cyberspace Administration of China about a fine and other penalties.
Didi’s shareholders, which also include the likes of Fidelity Investments and Blackrock (NYSE:BLK) Inc., have so far avoided commenting on the delisting.
©2022 Bloomberg L.P.
