It plans to file the required paperwork with the US Securities and Exchange Commission on or after June 2 in order to delist, Didi said in a statement Monday. Its shares gained as much as 5.3% at the trading open.
The shareholder vote clears the way for the company to work with Chinese regulators who are demanding an overhaul of its
. That would allow the company to begin preparing for a Hong Kong share float, the best outcome investors have said they can hope for.
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“This news is well anticipated and is sort of a relief rally,” said Brendan Ahern, chief investment officer at Krane Fund Advisors LLC. “The move is in order to allow its regulatory overview to take place, which then begs the question if and when the company could relist and there’s been talk about the company potential re-listing on the Hong Kong stock exchange.”
Didi’s biggest shareholders, which include SoftBank Group Corp., Tencent Holdings Ltd. and Uber Technologies Inc., have watched Didi’s shares fall about 90% since going public, when it was valued around $80 billion. After delisting, the company will likely see its stock traded over the counter on the so-called pink-sheets market, home to penny stocks and other riskier businesses.
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Some investors could be forced to sell because their mandates don’t allow them to hold unlisted shares. Hedge funds have already reduced their Didi holdings by 29% to about $231.9 million during the first quarter, according to a Bloomberg analysis of filings. Even those who are free of such mandates, such as SoftBank, may question whether it’s worth holding onto the shares given uncertainty over Beijing’s punishment, increased competition from smaller rivals and stalled expansion overseas.
It is still unclear what actual punishment awaits Didi, which has been in talks with the Cyberspace Administration of China about a fine and other penalties.
Didi’s shareholders, which also include the likes of Fidelity Investments and Blackrock Inc., have so far avoided commenting on the delisting.
