Beijing is stepping up its review of ridesharing giant Didi Global, announcing on Friday that seven government departments have jointly launched an on-site cybersecurity investigation against the company.
The Cyberspace Administration of China (CAC) said in a brief notice posted on its website that other government departments including the Ministry of Public Security, the Ministry of Transportation and the Ministry of Natural Resources would be jointly stationed at the Beijing-based company, such as they carry out their probe. No mention was made of how long the investigation would take or what penalties Didi might face. The company did not immediately respond to an email request for comments.
Zhu Wei, a professor at China University of Political Science and Law, says the investigation could take months as regulators investigate Didi’s operations to ensure his data is kept safe. The last few weeks have been turbulent for Didi. Shortly after the $ 4.4 billion IPO in New York City, Chinese regulators ordered the removal of all 25 of the company’s apps from app stores and new user registrations were suspended.
China’s cybersecurity regulators have been investigating Didi since the beginning of this month. They had previously proposed postponing its IPO and asked the company to review its network security to protect its users’ data, according to a Wall Street Journal Report citing anonymous sources. Didi told the newspaper that “prior to going public, it was unaware of the regulator’s decisions to subject the company to cybersecurity reviews and prohibit new downloads of its ride-hailing app.”
Still, the company’s shares are already down more than 10% below the $ 14 IPO price, leading to a series of class action lawsuits alleging that Didi published false and misleading information and failed to disclose the potential cybersecurity investigations .
Meanwhile, China is also drastically tightening the screening process for companies wanting to list their stocks overseas. CAC announced a proposal last week that any company with data from more than 1 million users must complete a security clearance before listing overseas. In response, several Chinese companies, including fitness app Keep and medical data company LinkDoc, have put plans for listing in the US on hold
“Instead of finance or securities regulators, the CAC will lead the review process of Chinese companies’ overseas IPOs,” said Shen Meng, director of Beijing-based boutique investment bank Chanson and Co, completing his initial public offering before receiving regulatory approval, and “this is clearly not allowed “.