Shares of China's ride-hailing service DiDi Global (NYSE:DIDI) ended today's session up 13.9% following reports that the same Chinese regulators investigating the company since July recently suggested the company consider a Hong Kong listing of its shares.
The Wall Street Journal posted the article, intimating representatives of China's Cyberspace Administration brought up the prospect of issuing shares in Hong Kong with DiDi executives.
If true, the move largely reverses the rhetoric from just three months ago, when China's regulators raided Didi's corporate offices to kick off an investigation of the company, seemingly in retaliation for moving forward with a U.S. listing of its stock in June. While the investigation was superficially linked to concerns regarding the protection of digital consumer data, such regulatory investigations can create sweeping, difficult outcomes under single-party control. The potential penalty being considered by China's Cyberspace Administration for DiDi were at one point being described as unprecedented. The scope of any penalty appears to have been dialed back in the meantime.
DiDo Global's recent saga is only part of a much bigger regulatory crackdown on most of China's technology companies.
The reports are encouraging to be sure. But the additional benefit of a Hong Kong listing at this point isn't clear. Shares already trade via the New York Stock Exchange, and actual demand for the stock could be muted in the current environment.
Although the Shanghai Stock Exchange and the Shenzhen Stock Exchange offer shared access to the Hong Kong exchange's listings, China’s Shanghai or Shenzhen exchanges are arguably the better listing options … if visibility is the concern. It's also conceivable that the Cyberspace Administration of China is steering the company toward a Hong Kong listing with the eventual intent of delisting it from the NYSE.
Those aren't predictions or accusations. They're just observations and possibilities. Given the sheer number of unknowns in play here, however, Thursday's big surge only makes DiDi Global a tougher name to step into.