Ride-hailing company DiDi Global (NYSE:DIDI) continues to suffer from China’s ruthless regulatory crackdowns in the tech sector. After enjoying — likely as a result of Singles’ Day — share price elevation, DIDI stock is back to baseline today, trending close to $8.95. Even as it prepares to relaunch numerous recalled apps, the Chinese Uber (NYSE:UBER) equivalent can’t seem to shake a turbulent past few months.
What’s going on with the tech stock following historic seasonal sales?
DiDi stock has been on a rollercoaster ride this month. The world’s leading mobile transportation platform has been largely unable to enjoy the seasonal commercialism that proliferates China due to uncertainty regarding the status of its mobile apps. DiDi is just one of many major Chinese companies under intense scrutiny from the Cyberspace Administration of China (CAC). But the company’s regulatory setbacks are some of the most drastic.
Just days after going public this summer, the CAC ordered that 25 Didi-operated mobile apps be removed from the app store. Citing privacy and data breach concerns, DiDi was prohibited from registering new users and is now required to make sweeping changes to their data-collection practices. It’s been a downhill story for the company since then.
Can DiDi Stock Reverse Its Fortune Amid Relaunching Speculation?
DiDi’s June initial public offering (IPO) shot its stock price up to $16, for a staggering $62 billion valuation. Given its current stumbles, however, DIDI tends to float closer to $9. With that said, there is still time — and money — to undo the damage.
DiDi is optimistic in its short-term prospects. The company is preparing to relaunch many of its recalled apps before year ends, according to a Reuters report. Speculating that the China probe will be concluded by then, DIDI stock could be set to bounce back with a vengeance, even putting aside 10 billion yuan ($1.6 billion) to settle potential fines.
They have quite a bit of catching up to do, however. Firstly, a $1.6 billion fine is equivalent to 7% of DiDi’s 2020 revenue. Not exactly a slap on the wrist. Didi’s underlying platform has also lost more than 30% of users since closing its proverbial doors. Now, considering China has a population almost five times the size of the United States, it’s not outrageous to imagine a world where DiDi comes roaring back.
How loud will they roar? That remains the question on shareholders’ minds.
On the date of publication, Shrey Dua 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.
