Didi fell further below the IPO price as China balances rule changes

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(Bloomberg) — Shares of Didi Global Inc fell for a third day in a row on Wednesday, hitting new lows, as China was said to be considering closing a loophole used by companies to list their shares overseas.

The car rental company is down 6.5% and is trading at $11.77 as of 10 am in New York. US depository shares fell 20% in Tuesday’s session, and are now trading at more than 15% of the $14 sold in their IPO. Didi’s bid was the second largest in the United States for a listed Chinese company. The company has lost more than $18 billion in market value so far this week, including about $15 billion on Tuesday alone.

“The Chinese government has made it clear that it is acting in what it believes is its best interests,” said Steve Sosnick, chief strategist at Interactive Brokers. “This does not rule out the idea that one can or should invest in China, it just changes the required risk premium.”

Regulators in Beijing plan to change rules that would allow them to prevent a Chinese company from listing abroad even if the unit that sells shares is incorporated outside China, shutting down a route long used by the country’s tech giants, according to people familiar with the matter. .

The people, who asked not to be identified while discussing a private matter, said the China Securities Regulatory Commission is leading efforts to review the rules for overseas listing that have been in place since 1994. The people said the proposed changes, which are subject to approval by the State Council, could also affect the Companies that have already gone public using what is called a variable interest entity model.

Read: Didi Crackdown Muddies investment case for Chinese tech stocks

China on Tuesday issued a blanket warning to some of its largest companies, pledging to tighten oversight of data security and overseas listings. This has led to more selling pressure on China’s biggest technology names, including Alibaba Group Holdings Limited, JD.Com and Baidu.

The story continues

The measure of Chinese technology stocks traded in Hong Kong fell 1.9% on Wednesday to near its lowest level since November. The index has fallen more than 30% since its February high, while a gauge of China-US deposit receipts has lost about 11% so far this year.

(Update stock quotes around and add a comment from Interactive Brokers.)

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