Didi Shares Plunge After China Launches Investigation

One day ahead of this week’s blockbuster DIDI IPO in which the Chinese Uber sold at the top of its $13-14 range, broke for trading at $16.75 then tumbled only to rebound on Thursday, we warned readers that this is one they want to stay away from as a result of Beijing’s aggressive intervention in publicly traded tech giants, to wit:

China’s regulatory crackdown on its internet giants is likely having a ripple effect on the IPO, given the uncertainty around outcomes. Didi was among 34 internet firms ordered by regulators in April to correct excesses, and it has warned in U.S. filings that it couldn’t assure investors that government officials would be satisfied with its efforts or that it would escape penalties.

It took exactly 3 days since our warning and 2 days since DIDI’s IPO for this forecast to come true because this morning, DIDI shares havbe cratered more than 10%, plunging from $17 to as low as $15, after a report that China had launched an investigation into Didi Chuxing.

According to a statement from Cyberspace Administration of China, Didi Chuxing will halt registration of new users during the review. The move is to prevent data security risks, safeguard national security and protect public interest, according to statement.

In short, this is Beijing’s way of punishing euphoric US investors in the DIDI IPO, a move which however will hardly inspire confidence in any future US-based Chinese public offerings.