Chinese ride-hailing company Didi Global intended to defraud investors by raising more than $4.4 billion through its initial public offering (IPO) on the New York Stock Exchange in 2021, a U.S. court ruled on Thursday.
The U.S. district court added that the company must face a lawsuit from investors for concealing and violating a Chinese government order postponing its controversial IPO.
Didi pressed ahead with its June 2021 stock sale that valued the company at $73 billion, despite Beijing ordering that it first address cybersecurity and privacy concerns over cross-border data flows.
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A month before the IPO, China's market regulator also came into action an antitrust investigation against Didito investigate whether the company used competitive practices to unfairly squeeze out smaller competitors.
The regulator also examined whether the pricing mechanism used in Didi's core ride-hailing business is transparent enough.
Despite these concerns, angered by Didi's inclusion on the list: China's cyberspace regulator the Cyberspace Administration of Chinabanned the company from registering new customers two days after its IPO.
The Didi Travel app was also ordered to be removed from smartphone app stores.
Didi shares fell as much as 25% in the first U.S. trading session after regulators' crackdown.
In December 2021, Didi announced It would delist the U.S.-listed shares. Didi shares began trading in March 2022 87% below their IPO price.
China's regulator fined Didi $1.2 billion in July 2022 about the episode. The company's market value is currently about $19 billion, according to LSEG data.
In a 54-page decision, U.S. District Judge Lewis Kaplan said Didi's alleged desire to sell American depository stocks ahead of a threatened government crackdown on Chinese technology companies gave the company and various officials a “specific and personal economic motive.” the IPO” to go public “Window for highly valued Chinese IPOs in the United States” closed.
Kaplan also refused to dismiss claims against banks that helped Didi go public.
- Reuters, with additional contributions from Vishakha Saxena
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