What happened
Shares of Baozun (BZUN 3.36%), Bilibili (BILI -0.14%), and Baidu (BIDU 1.07%) dived today as U.S.-listed Chinese stocks responded poorly to news that DiDi Global (DIDI 0.97%), the Chinese ridesharing leader that had just held a blockbuster initial public offering (IPO) back in June, would delist from the New York Stock Exchange.
The announcement spooked holders of U.S.-listed Chinese stocks broadly, and as of 2:20 p.m. ET on Friday, Baozun was trading down 9%; Bilibili, meanwhile, was off 7.5%, and Baidu had given up 8.5%. At the same time, DiDi shares had lost 20.1%.
Image source: Getty Images.
So what
In a press release this morning, DiDi said it would begin the process of delisting its American depositary shares from the New York Stock Exchange. It said that the shares would be freely convertible into those on another internationally recognized stock exchange pending a shareholder meeting to decide which one. The company is also planning to list its shares on the Hong Kong exchange.
Management did not offer an explanation for the decision, which comes just months after its high-profile listing on the New York Stock Exchange, though pressure from the Chinese government appears to be the reason. Reuters has reported that Chinese regulators had pressured the company to delist from U.S. exchanges, due to concerns about data security.
DiDi had come under scrutiny in the past as Chinese regulators ordered its app to be removed from app stores shortly after the company's listing, accusing it of illegally collecting customers' user data.
The announcement doesn't directly affect Baozun, Bilibili, or Baidu, but it adds to the negative sentiment toward U.S.-listed Chinese tech stocks that has been building during a crackdown that has now gone on for more than a year, starting last November when Ant Group's IPO was blocked after founder Jack Ma made negative comments about Beijing's finance ministers.
Baozun itself has seen growth slow dramatically in recent quarters, and the stock has fallen along with it. Revenue growth was just 4% in the most recent quarter as the e-commerce services provider is experiencing a number of headwinds related to the regulatory environment, including a slowdown in end consumer demand and headwinds in certain sectors like apparel.
Bilibili, an online entertainment company with a YouTube-like platform, reported strong numbers in its recent earnings report, but the stock still fell and is now down by 40% since its earnings report just two weeks ago.
Baidu, which owns China's leading search engine, also posted disappointing results, with revenue growth up just 13% and margins narrowing.
Now what
None of these three stocks seem likely to delist themselves the way DiDi is doing, as they haven't faced the same level of scrutiny from the Chinese government. However, DiDi's unraveling will only add to the pressure that these stocks are already facing. There's no telling when the fallout among Chinese stocks will reach a bottom, and the sharp decline in U.S. growth stocks today doesn't help the case.
Bilibili remains fundamentally strong with revenue growth above 50%, and could rebound if market sentiment improves. Baidu and Baozun, on the other hand, seem to be facing more-structural challenges, and could likely struggle regardless of macroecnomic and geopolitical forces. Either way, it's best to treat Chinese stocks with caution until there are signs that tensions with the government are easing.
