Will DiDi Stock Go Private Following China's App Shutdown?

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Jul. 30 2021, Published 12:12 p.m. ET

Big tech has an even bigger enemy, and it's the Chinese government. That's why, moments after DiDi Global Inc. (NYSE:DIDI) went public in a $4.4 billion IPO, China shut down the DiDi ride-hailing app due to its practice of inflated prices and unfair driver treatment. The fledgling stock plummeted and hasn't recovered yet from its initial price point.

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Ultimately, there are two negative outcomes that could come from the DiDi situation. The stock could get delisted from the NYSE or DiDi could decide to go private. Will the company do the latter?

A report said DiDi Global (DIDI) was thinking about going private.

On Jul. 29, one of the most reputable newspapers, The Wall Street Journal, came out with word that DiDi was thinking about going private. Why? Reportedly, the company doesn't feel like it's able to appease Chinese regulators on the U.S. public market. Because of that, current investors might be left with major losses.

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The article referred to sources who were "people familiar with the matter," which just means that the source doesn't want to be named for some reason or another. Anonymous sources can be legitimate, but journalists know they should be used sparingly and only when necessary.

With DIDI stock's losses at 31.05 percent since the debut and no end in sight with the fight against Chinese regulators, the notion that the company could go private is fair game.

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DiDi said that it isn't going private.

Following the report that DiDi was contemplating a reversal to the private market, DIDI stock immediately jumped by about 30 percent (although all-time losses are still at 31 percent). Shortly after the influx of positive trading activity, the DiDi team said that there isn't any truth to the matter about it going private.

So, who are those people familiar with the matter, and how much do they really know?

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It also makes investors wonder whether this was a desperate attempt at artificially inflating a stock that was progressively losing stamina. It isn't like such last-ditch efforts haven't been made before.

So, is DiDi going private or not?

Functioning as a public company is an intricate web. Executives are required to please customers for their actual product or service, plus retail investors and institutional shareholders. Then there are the regulatory standards in their home country, countries where they operate, and the country (or countries) of their listing.

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That's a lot of factors, and DiDi's situation shows there isn't always a straightforward solution to please everyone. With the Chinese government on its back for antitrust and cybersecurity matters, the future of DIDI stock isn't certain.

If shares for any NYSE-listed stock close below $1.00 for 30 consecutive trading days, the security would start the delisting process. There are also rules regarding minimum market capitalization, revenue output, and more.

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It isn't really up to DiDi whether or not the company gets delisted and is forced to move to the over-the-counter market, but it's up to the company to decide whether it wants to intentionally go private.

Right now, DiDi denies that it's considering going private—but there might be merit to what those anonymous sources had to say.

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