DiDi Global (NYSE:DIDI) stock is down 20% today after the Chinese ride-hailing and delivery company announced plans to officially delist from the New York Stock Exchange.
A key date for investors to watch is May 23 when DIDI shareholders will vote on the delisting proposal and determine the company’s future in the public markets.
Shares of DiDi Global have been under pressure since the company went public last June and regulators in China immediately cracked down on the ride-hailing firm, saying its shares should only be listed on exchanges in mainland China or Hong Kong. Since its market debut less than a year ago, DIDI stock has declined 84% to trade in New York at $2.46 a share. And that was before today’s selloff.
What Happened With DIDI Stock
Over the weekend, the China Securities Regulatory Commission said that DiDi’s decision to delist was its own decision and made based on market conditions. As part of this, authorities maintain that DiDi’s decision does not impact other U.S.-listed Chinese companies.
DiDi said that it will hold an extraordinary general meeting on May 23 for shareholders to vote on its voluntary delisting from the New York Stock Exchange. DiDi Global had planned to list shares in Hong Kong in March of this year but regulators canceled those plans after they deemed that the company still did not meet certain requirements.
DIDI stock fell 44% in a single trading day when investors learned about the canceled plans.
Why It Matters
Also over the weekend, DiDi reported that its fourth-quarter net loss almost doubled from a year earlier. Specifically, its loss widened by 95% from a year earlier to 383 million yuan ($60.17 million). Its revenue declined 13% to 40.78 billion yuan.
The planned delisting and mounting losses put the future of DiDi Global as a going concern into doubt. Shareholders must decide if it is worth it to continue holding onto DIDI stock ahead of the May 23 delisting vote or sell now before the price drops further.
More broadly, the delisting of DiDi highlights ongoing problems with Chinese companies that list shares on U.S. stock exchanges, where accounting standards and audit procedures often put Chinese firms in conflict with American regulators. The delisting of DiDi also highlights ongoing tensions between regulators and authorities in China and the U.S. Beijing has been cracking down on public companies over the past two years, particularly companies that have shares listed on foreign stock exchanges.
What’s Next for DiDi
It’s not looking good for DIDI stock. The expectation is that the company will delist from the New York Stock Exchange following the upcoming May 23 vote. Investors holding onto DiDi Global should likely sell now as the share price can be expected to continue falling in the lead up to the delisting vote. Barring a miracle, it looks unlikely that DiDi Global will continue life as a public company.
On the date of publication, Joel Baglole 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.
