The DiDi Global Delisting Threat Is Too Plausible to Ignore

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Right now, the U.S. is engaged in a cold war. Not with Russia, but with China. Among the collateral damage could be Chinese ride-hailing giant DiDi Global (NYSE:DIDI), and DIDI stock in the U.S. may end up facing the worst-case scenario.

DiDi logo on smartphone
Source: Piotr Swat / Shutterstock.com

By that, I mean that the stock could be delisted in the U.S. International tensions are rising, with cybersecurity at the center of an ongoing battle and as an investor, you don’t want to get caught in the crossfire.

Don’t misunderstand – there are reasons to maintain a very small position in DIDI stock. Just understand that it would be a speculative position, i.e., a lottery ticket which could double or go to zero.

Some folks will say this, too shall pass, meaning that the international tensions will blow over. Sure, that’s possible, but I don’t recommend wagering your hard-earned money on the cybersecurity war ending the near term.

A Closer Look at DIDI Stock

Unless they caught the initial price boost and sold at the right time, chances are pretty good that many investors are disappointed in DIDI stock’s performance.

Going back to the beginning, DiDi had its U.S. initial public offering on June 30. The stock began trading at $16.65, around 19% higher than the company’s offering price of $14 per share.

It was a wild first day of trading, to say the least. DIDI stock rose as much as 28.6% from the IPO price at one point. However, the stock only closed up 1% at the end of the trading session.

The share price stayed fairly close to $15 for a couple of days, before the bears completely took over the price action. For most of July and early August, the overall trajectory was to the downside.

Now DIDI stock is trading at less than $9. At the same time, DiDi’s trailing 12-month earnings per share was -$2.32. That’s not good when the stock is just $8 and change.

Coming Under Fire

That’s bad, but it could get worse. There may come a time when the stock ceases to exist – or at least, gets booted from the New York Stock Exchange.

As you may already be aware, the Chinese government has initiated cybersecurity reviews of DiDi and a number of other China-based companies.

Consequently, DiDi reportedly isn’t allowed to register new users.

Evidently, Chinese regulators have also prohibited new downloads of DiDi’s app, and are considering the DiDi IPO a “deliberate act of deceit.”

One analyst, however, seems to imply that the real target of the Chinese government isn’t DiDi in particular, but the U.S. capital markets.

And, he may have a valid point.

The Days Are Numbered

In a recent interview, Muddy Waters Capital founder and CIO Carson Block explained that Chinese President Xi Jinping is ready to pull companies like DiDi from U.S.-based exchanges:

I think Xi Jinping is saying, look, US-listed companies need to understand that they have to find an alternate way of accessing capital markets. Come back to the mainland, come to Hong Kong, but their days in the US are numbered.

It’s not difficult to find evidence of this.

Just recently, China’s Ministry of Transport vowed to step up its oversight of the nation’s ride-hailing companies.

That particular warning didn’t mention DiDi by name. Still, the company is an obvious target.

Meanwhile, the U.S. Securities and Exchange Commission (SEC) fired back with its own regulatory clampdown.

Specifically, the SEC halted IPOs of Chinese companies in the U.S. until they provide enhanced disclosures of the risks posed to shareholders.

The Bottom Line

Clearly, the battle is heating up between China and the U.S.

And Chinese regulators are making life difficult for U.S.-based DIDI stock investors.

Sure, you can own a few shares in hopes that the tensions will subside soon. Yet, that’s not a viable investment strategy.

DIDI stock could actually get de-listed from the New York Stock Exchange. As a market trader, the last thing you need is to be another victim of this ongoing war.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.


Article printed from InvestorPlace Media, https://investorplace.com/2021/08/didi-stock-delisting-threat-is-too-plausible-to-ignore/.

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