Didi’s Brief U.S. Foray Is Ending. What Happens Next?

Didi Global Inc. $DiDi Global (Delisted)(DIDI.US)$ said Thursday it plans to delist from the New York Stock Exchange, barely five months after its initial public offering drew the wrath of Beijing. The Chinese ride-hailing giant said it plans to list in Hong Kong instead, allowing existing shareholders to convert their holdings in the company. But the announcement was scarce on details, leaving investors -- already nursing roughly $40 billion of losses -- with many unanswered questions.

Chinese regulators have opposed the U.S. listing as they are concerned it could expose Didi’s vast troves of data to foreign powers. The firm pressed ahead with the June IPO anyway, in a move that Beijing saw as a challenge to its authority. Days after the listing, the government announced a cybersecurity probe into the firm and forced its services off domestic app stores. Last week, people with knowledge of the matter said officials had directed Didi management to come up with a plan to withdraw from the NYSE. Didi’s exit is unlikely to be the last, with the government said to be drafting regulations to effectively ban Chinese companies from going public on foreign markets using the so-called variable interest entity (VIE) structure. The Chinese internet regulator began probing two more U.S.-listed companies, Full Truck Alliance Co. and Kanzhun Ltd., soon after launching the review into Didi. Proposed U.S. legislation threatens to raise another potential obstacle to local listings by Chinese companies as it would mandate foreign companies to open their books to U.S. scrutiny or risk being kicked off the NYSE and Nasdaq within three years.

Will investors swap their stock for Hong Kong shares?

It depends. Didi has dropped 52% from its post-IPO peak, wiping out about $42 billion of market value. Japan’s SoftBank Group Corp., the largest minority shareholder in Didi, last month reported a record loss at its Vision Fund unit, in part because of the stock’s plunge. Some shareholders may use the delisting as an excuse to exit, and certain retail investors may not be in a position to hold Hong Kong shares. Technically speaking, swapping the U.S. shares for stock in Hong Kong should be relatively straightforward for most institutional shareholders. But the new securities may trade with a valuation discount: Hong Kong has long been home to some of the world’s lowest price-to-earnings ratios. A gauge of tech shares in the city briefly touched a record low on Friday.

Article excerpted from Yahoo.