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Didi shares plummet after China bans it from app stores

<i>Yan Cong/Bloomberg/Getty Images</i><br/>The Didi ride-hailing app on a smartphone arranged in Beijing
Bloomberg via Getty Images
Yan Cong/Bloomberg/Getty Images
The Didi ride-hailing app on a smartphone arranged in Beijing

By Matt Egan, CNN Business

Democratic Senator Chris Van Hollen called on US financial regulators to probe the disastrous IPO of Chinese ride-hailing company Didi.

“The SEC should thoroughly investigate this incident to see if investors were intentionally misled by Didi’s public disclosures,” Van Hollen told CNN Business in a statement.

Didi raised $4.4 billion by listing its shares on the New York Stock Exchange on June 30, marking the biggest US IPO by a Chinese company since 2014.

Within days, Didi’s share price collapsed, costing US investors dearly The selloff was triggered by a crackdown from China, which announced on July 4 it is banning Didi from app stores in the country because it poses cybersecurity risks and broke privacy laws.

Didi’s market value tumbled to $57 billion by Wednesday’s close, down from nearly $70 billion on its first day of trading. The stock dropped another 7% in premarket trading on Thursday morning as Chinese tech stocks tumbled.

“American investors need confidence that the companies that list on U.S. exchanges are not engaging in fraud and should have access to information on the risks posed by investing in foreign companies — especially those influenced by foreign governments,” Van Hollen, a Democrat from Maryland, said in the statement.

In a statement on Sunday, Didi said it will “strive to rectify any problems, improve its risk prevention awareness and technological capabilities, protect users’ privacy and data security, and continue to provide secure and convenient services to its users.”

The SEC did not respond to repeated requests for comment.

Bipartisan outrage

Van Hollen championed a bill signed into law last year by former President Donald Trump that requires US-listed companies to be held to American auditing standards and establish they are not owned or controlled by a foreign government. Under the law, companies that fail to comply with US auditing standards for three years in a row will get kicked off US exchanges.

There is bipartisan outrage over the Didi situation. Republican Senator Marco Rubio told the Financial Times that it was “reckless and irresponsible” for Didi to be allowed to sell shares.

“Even if the stock rebounds, American investors still have no insight into the company’s financial strength because the Chinese Communist party block US regulators from reviewing the books,” Rubio told the UK newspaper. “That puts the investments of American retirees at risk and funnels desperately needed US dollars into Beijing.”

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