Just as the Chinese ride-hailing platform Didi Global was getting back on track after its delisting disaster, it now faces a lawsuit in the US after a federal court determined the company defrauded American investors in 2021.
On March 14, a federal judge in Manhattan ruled that Didi Global knowingly disobeyed Chinese government orders to postpone its IPO until regulatory concerns were resolved and then concealed this fact from investors, defrauding them of 4.4 billion USD in funding.
During the time Didi was preparing to go public, Chinese regulators began a sweeping crackdown on technology companies, placing much greater scrutiny on their financial records and data security. As the judge said during the hearing, this circumstance provided a “concrete and personal economic motive” for the company to mislead investors in order to push through the IPO.
The decision comes as Didi Global was gearing up for a full post-crackdown comeback. Last January, the ride-hailing platform finally gained permission to resume new user registration after an 18-month suspension and a 1.2 billion USD fine for breaching data security regulations in China.
Despite haemorrhaging users as a result of the suspension, in the past year since its return the app has managed to claw some of them back. In its latest financial results, the company’s revenue grew 26.6% year-on-year in the third quarter. The company is also planning on launching an IPO on the Hong Kong Stock Exchange this year, as reported by Bloomberg in October 2023.
Didi used to hold 90% of the ride-hailing market share, but in the time since it was suspended, food delivery giant Meituan massively expanded its services and the local life services sector (which also includes cinema tickets and takeaway food) became much more competitive.
Didi’s current valuation is 19 billion USD, less than one third of what it was valued on the New York Stock Exchange in 2021 prior to its fateful delisting.
