What happened
The largest ridesharing company on the planet, China's DiDi Global (DIDI +2.97%), saw its stock price shrivel by more than 11% on Thursday. A Bloomberg article published that morning was the foot that slammed the brakes on the company.
So what
That article, crediting "people familiar with the matter," reports that Chinese authorities are mulling the imposition of significant penalties on DiDi. Those sources said this would effectively be punishment for the company's recent U.S. IPO, which it decided to go forward with despite resistance from China's Cyberspace Administration.
Image source: Getty Images.
A number of sanctions are allegedly being considered. Possibilities include financial penalties, the mandatory entry of the state as an investor, a delisting of the company's New York Stock Exchange-listed shares, and the suspension of some operations. Such deliberations are currently at an early stage.
Three Chinese government entities plus DiDi were contacted for comment on the article; none responded to the requests.
Now what
DiDi's U.S. IPO in late June was initially considered a success, with the company raising $4.4 billion from the offering. Since then, however, Didi and other Chinese enterprises listed on U.S. markets have had targets painted on their backs. Didi's mobile app was forcibly withdrawn from app stores in China, depriving it of the ability to add new customers, and it now looks like more punishment is coming.
The Bloomberg article and the resulting hit to DiDi's share price are a stark reminder of the risk faced by all Chinese companies with international ambitions -- if they run afoul of officialdom in Beijing, they will suffer the consequences.
