Didi, the mobile transportation company in China, will hold an extraordinary general meeting to decide whether to voluntarily delist from the NYSE. The move is to better cooperate with its required cybersecurity review and rectification measures after running afoul of Chinese regulators with its US IPO.
 

Image Source: Didi Global

On December 3, 2021, Didi (NYSE: DIDI), often referred to as China's Uber, notified that it plans to delist on the New York Stock Exchange and would start preparations to list in Hong Kong. However, based on its recent announcement on April 16, 2022, investors may have to change their strategy.

According to the latest announcement, Didi will hold an extraordinary general meeting on May 23 to vote on whether the company will voluntarily delist from the New York Stock Exchange. In addition, to better cooperate with the cybersecurity review and rectification measures, the company would not apply for re-listing on any other stock exchanges before completion of the delisting in NYSE. Didi's stock price fell 18.79% after the announcement.

Regarding this announcement, China Securities Regulatory Commission (CSRS) said that it was an independent decision made by Didi, and there would be no impact on any other Chinese companies listed in the US. Additionally, there was no connection with the meeting between US and Chinese regulators regarding an ongoing audit dispute. Therefore, according to the CSRS statement, Didi still seems to be a special case, and has no connection with any systemic risk for Chinese companies.

In addition, Didi also released its 2021 financial results. It showed that Didi achieved revenue of 173.83 billion yuan in 2021, representing a 22.7% year-over-year growth. However, its net profit was a loss of 50 billion yuan, compared with the loss of only 10.51 billion yuan in the same period last year.

The competition in the online car service industry has further intensified. Recently, competitors such as CaoCao Travel, T3 and Hello Travel have successively announced another completion of financing, and Meituan Taxi is now available on major app stores. After successive years of losses, Didi might not be able to maintain the high cash burn rate needed to seize more or even maintain its current market share.

Overall, the outlook for Didi it is not optimistic. Both due to its recent policy decisions and its own financial report. Many years of cash-burning strategy has affected Didi's cash flow. May 23rd, when the result of the vote comes out, is probably when the Didi bubble will be punctured.