What happened
Shares of the Chinese ride-hailing company DiDi Global (DIDI 1.83%) traded more than 13% lower as of 10:11 a.m. ET today after the company announced earnings results for the fourth quarter of 2021. DiDi also announced that it would hold a vote among shareholders on May 23 for potential delisting from the New York Stock Exchange. Shares had been down nearly 27% in premarket trading.
So what
In the fourth quarter of 2021, DiDi reported a net loss equivalent to roughly $60 million attributed to ordinary shareholders. Total revenue came in equivalent to $6.4 billion, down about 12.7% from the fourth quarter of 2020.
Image source: Getty Images.
But the big news is that DiDi is planning to hold a shareholder vote on May 23 over whether to delist from the New York Stock Exchange (NYSE), a move that had been discussed toward the end of 2021 but had also been uncertain. The company said in a release that it "is in full cooperation with the cybersecurity review in China."
The move comes after U.S. financial regulators earlier this year took steps to potentially delist hundreds of Chinese stocks from U.S. stock exchanges due to noncompliance with U.S. auditing laws. Chinese law does not allow foreign accountants to review Chinese working financial statements due to national security concerns. In recent weeks, the dispute has taken a positive turn as Chinese financial regulators have voiced support for Chinese stocks listed on foreign exchanges and said they would work with U.S. regulators on a resolution.
Now what
DiDi's potential delisting is interesting because last year the company announced plans to leave the NYSE and list in Hong Kong. But in early March Chinese regulators shut down that plan on security and data concerns. Now, with a vote planned and the company saying it is in full cooperation with China's cybersecurity review, perhaps it does have some kind of approval from Chinese regulators to list on another exchange.
After DiDi's initial public offering and listing on the NYSE last July, Chinese regulators launched an investigation into the company and banned its app from Chinese app stores. Shares of DiDi are down more than 86% since the company went public. Perhaps leaving the NYSE will end some of the regulatory issues DiDi has had over the last year.
Shareholders holding American depositary receipts will still be able to sell shares over the counter if DiDi delists, but the stock will likely lose demand because it would no longer have access to the kind of liquidity and demand a stock gets from being listed on the NYSE.
