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Didi shares plunge more than 20% on plan to delist from NYSE By Reuters

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© Reuters. FILE PHOTO: A sign of Chinese ride-hailing service Didi is seen on its headquarters in Beijing, China July 5, 2021. REUTERS/Tingshu Wang

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By Julie Zhu and Kane Wu

HONG KONG (Reuters) – Just five months after its debut, ride-hailing giant Didi Global said it plans to withdraw from the New York Stock Exchange and pursue a Hong Kong listing, a stunning reversal as it bends to Chinese regulators angered by its U.S. IPO.

Reaction from investors was swift: the company’s shares fell 22.17%, losing about $8.4 billion in market value. At their Friday close of $6.07, Didi shares have fallen about 57% since their June 30 IPO price.

“Following careful research, the company will immediately start delisting on the New York stock exchange and start preparations for listing in Hong Kong,” Didi said on its Twitter-like Weibo (NASDAQ:) account.

Didi did not elaborate but said in a separate statement it would organize a shareholder vote at an appropriate time and ensure its New York-listed stock would be convertible into “freely tradable shares” on another globally recognized exchange.

Market participants said the decision ramps up uncertainty for investors in U.S.-listed shares of Chinese companies. U.S.-listed shares of Alibaba (NYSE:) , Baidu (O:) and other Chinese firms fell on Friday.

“If you are a money manager and don’t understand what the rules are, it’s easier to just sell and move your money where you better understand the rules of the game,” said Michael Antonelli, market strategist at Baird.

Sources told Reuters last month that Chinese regulators had pressed Didi’s top executives to devise a plan to delist from the New York Stock Exchange due to concerns about data security.

Didi’s board convened on Thursday and approved the U.S. delisting and HK listing plans, said two sources with knowledge of the matter.

Didi pushed ahead with a $4.4 billion U.S. initial public offering in June despite being asked to put it on hold while Chinese officials reviewed its data practices.

The powerful Cyberspace Administration of China () then quickly ordered app stores to remove 25 of Didi’s mobile apps and told the company to stop registering new users, citing national security and the public interest.

Didi, whose apps, in addition to ride-hailing, offer products such as delivery and financial services, remains under investigation.

Redex Research analyst Kirk Boodry, who publishes on Smartkarma, said Didi may need to buy shares at the $14 IPO price to avoid legal issues and at the very least pay more than the current share price.

However, uncertainty remained over what the delisting means for investors. “There may also be some hope that by doing this, Didi management will improve its regulatory relations, but I am less confident on that,” Boodry added.

The upending of Didi’s New York listing – likely to be a difficult and messy process – underscores the huge clout Chinese regulators possess and their emboldened approach to wielding it.

Billionaire Jack Ma ran afoul of Chinese authorities after blasting the country’s regulatory system, leading to the dramatic scuppering of a mega-IPO for Ant Group last year.

Didi’s move will likely further discourage U.S. listings by Chinese firms and could prompt some to reconsider their status as U.S. publicly traded companies.

“Chinese ADRs face increasing regulatory challenges from both U.S. and Chinese authorities. For most companies, it will be like walking on eggshells trying to please both sides. Delisting will only make things simpler,” said Wang Qi, chief executive of fund manager MegaTrust Investment (HK).

Didi plans to proceed with a Hong Kong listing soon and is not looking at going private, sources with knowledge of the matter told Reuters.

It aims to complete a dual primary listing in Hong Kong in the next three months and delist from New York by June 2022, said one of the sources.

The sources were not authorized to talk to the media and declined to be identified. Didi did not immediately respond to Reuters’ requests for comment, and the CAC has yet to comment on its announcement.

“Not long after the IPO U.S. investors had been trying to sue DiDi for failing to disclose its ongoing talks with the Chinese authorities. This is unlikely to be taken any better,” said William Mileham, an equity analyst at Mirabaud.

“It appears that DiDi are not waiting to be dual-listed, but could well be delisted from the U.S. before it starts trading on the HK stock exchange.”

GRAPHIC-Didi’s bumpy ride since listing in New York https://graphics.reuters.com/CHINA-DIDIGLOBAL/dwvkrzdjxpm/chart.png

HONG KONG HURDLES

Listing in Hong Kong, however, might prove complicated, particularly in a three-month timeframe, given Didi’s history of compliance problems and scrutiny over unlicensed vehicles and part-time drivers.

Only 20%-30% of Didi’s core ride-hailing business in China is fully compliant with regulations requiring three permits relating to the provision of ride-hailing services, vehicle licensing and drivers’ licences, sources have previously said.

Didi’s IPO prospectus said it had obtained ride-hailing permits for cities that together accounted for the majority of its rides. It has not responded to further queries about permits.

Those problems had been Didi’s main obstacle to conducting an IPO in Hong Kong earlier and it is unclear whether the bourse will approve it now, sources with knowledge of the matter said on Friday.

“I don’t think Didi qualifies to be listed anywhere before it … sets up effective protocols to manage and ensure the drivers’ responsibility and benefits,” said Nan Li, associate professor for finance at Shanghai Jiao Tong University.

The Hong Kong bourse does not comment on individual companies, a spokesperson said.

Didi provided 25 million rides a day in China in the first quarter, its IPO prospectus said. Its main shareholders are SoftBank’s Vision Fund, with a 21.5% stake, and Uber Technologies (NYSE:) Inc, with 12.8%, according to a filing in June by Didi.

Sources have also told Reuters that Didi is preparing to relaunch its apps in China by the year’s end in anticipation that Beijing’s cybersecurity investigation of the company would be wrapped up by then.



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Saudi Arabia’s Most admired Companies in 2022

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Insights Success is an archway that caters to Entrepreneurs’ quench of technology and business updates which are currently ruling the business world.
We are ceaselessly proving the best platform for leading companies, which aids indefinite progress while creating meaningful learning experiences for the visitors and invaluable brand awareness for the clients.



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Bank of England raises base interest rate to 1.75%

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The Bank of England has raised the base interest rate by half a percentage point to 1.75 per cent, the biggest rise since 1995, in an attempt to combat runaway inflation.

The nine-strong monetary policy committee voted eight to one in favour of a 50 basis point rise, defying some market expectations for an increase by 25 basis points.

It is the Bank’s sixth consecutive tightening in monetary policy and follows in the footsteps of the US Federal Reserve and European Central Bank, which have begun aggressively raising rates by larger increments.

Interest rates are now the highest since 2009 as the Bank attempts to bring down inflation, which is running at a 40-year high of 9.4 per cent and is on course to exceed 11 per cent later this year.

These would be the worst inflation rates in the G7, caused in large part by rising global energy prices driving household bills higher this year. The UK economy is also heading for a slowdown this year as consumer incomes are squeezed more tightly than since the 1950s.

Andrew Bailey, the Bank’s governor, has hinted that it will also announce how it intends to begin unwinding the £850 billion of government debt pumped into the economy since the financial crisis, offloading bonds worth between £50 billion and £100 billion from as early as next month.

The Bank will also deliver its quarterly outlook, with Bailey expected to forecast that inflation will rise beyond 11 per cent and remain in double digits into next year. The Bank’s target is 2 per cent.

Commenting on today’s Bank of England interest rate rise, David Bharier, Head of Research at the British Chambers of Commerce (BCC), said: “This rise is the clearest signal yet of the Bank of England’s intention to get inflation under control. Spiralling prices are cited by businesses as by far and away the top concern right now.

“However, given the extremely precarious state of the economy, this decision is not without risk for businesses and consumers that are exposed to banking or overdraft facilities.

“There are many causes of the current inflation crisis – global supply chain problems, trade barriers, soaring energy costs, increased taxes, and labour market shortages. Interest rate rises alone will do little to address these.

“Worryingly, our research indicates strongly that most small businesses are not investing for growth, and that longer-term confidence is beginning to wane.





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Opinion: OSC appointment fuss is a tempest in a teapot

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Jeffrey MacIntosh: The government has the legislated right to have a say in the agency’s course

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Ed Waitzer’s recent op-ed (“The issue at the OSC is integrity, not debate,” July 14, 2022) expresses surprise and disappointment in my recent op-ed (“Conflict at the OSC: Why the regulator needs to make room for dissent,” July 7, 2022). In that op-ed, I argued that lawyer Heather Zordel’s appointment as non-executive chair of the OSC in March of this year should be met with open arms, as it introduces new points of view into what seems to be a rather intellectually closed shop. I don’t suppose it will come as a shock to Ed Waitzer or anyone else that I am surprised and disappointed at his rebuttal.

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To begin with, it contains a number of inaccuracies. It states that Ms. Zordel was denied reappointment to her earlier position (2019-2021) as part-time commissioner. In fact, given her busy legal practice, she took herself out of the running. This puts a rather different complexion on the matter.

And I never stated or implied that Ms. Zordel was not reappointed as part-time commissioner because of two dissenting opinions that she wrote as commissioner. My point was that for Ms. Zordel’s critics the dissents were a factor in opposing her appointment as chair of the board.

The nub of my argument was that the OSC could benefit from greater variety of viewpoints among its brass as to what investor protection and other aspects of the OSC’s mission entail. By contrast, Mr. Waitzer argues: “the importance of debate and dissent is not the point here.” I beg to differ. As I indicated, some prominent accounts of Ms. Zordel’s appointment have put a pejorative cast on her disagreements with her fellow commissioners. That puts the issue of debate and dissent front and centre.

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I certainly agree with Mr. Waitzer that the independence of administrative agencies is a cornerstone of our democracy. But does that mean that every administrative agency should be entirely divorced from any government oversight whatsoever — a little fiefdom unto itself and in no sense answerable to its political masters? Not a whit. It is the government that creates the agency, defines its mandate, gives it the powers that it needs to carry out that mandate and defines its organizational structure. And it is entirely within the purview of the government to enlist its legislative power to re-define that mandate, powers, and organizational structure if it chooses.

We don’t have to look into the distant past to find an example. On the advice of a non-partisan blue ribbon panel — the Capital Markets Modernization Taskforce (“CMMT”) — the Conservative government has recently substantially reorganized the OSC via the Securities Commission Act, 2021 (declared in force in April). That legislation splits the adjudicative function (the “Capital Markets Tribunal”) from the regulatory function. Moreover, where before the reorganization the OSC Chair and CEO were the same person, the two offices are now split. As expressed by the CMMT, “The Board of Directors, led by the Chair, (will) focus on the strategic oversight and corporate governance of the regulator,” while “The CEO (will) be responsible for the overall management of the organization and execution of the OSC’s mandate.” The directors, including the chair, are all government appointees.

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This new structure, recommended by a non-partisan committee, gives the government of the day the power to influence, at the highest level, the strategic direction of the OSC. But why should it not? If the government is dissatisfied with the strategic vision or regulatory philosophy of the regulator or the manner in which it is being implemented, it would be profoundly anti-democratic — and at odds with the rule of law — to forbid the government from seeking to alter the agency’s course.

Indeed, the Ontario Securities Act states “The Commission is an agent of the Crown in right of Ontario.” The key word here is “agent.” It is not “hegemony,” “fiefdom” or “satrapy.” At the end of the day, the OSC is a government creation performing regulatory functions ceded to it by the government.

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Do Ms. Zordel’s conservative connections compromise the independence of the institution of which she is now head? Absolutely not. In the making of such appointments, the twin issues of competence and integrity will take up a lot of shelf space. But why should the government not also consider, if it chooses, whether potential nominees share the government’s regulatory philosophy

The true worry about political interference is that the government might attempt to dictate or influence the result of particular cases. But the new legislation builds in the important protection of ceding no operational powers to the board of directors. Thus, aside from the government’s power to approve or decline proposed rule changes (a longstanding feature of securities regulation), its sole discretionary avenue of influence lies in its power to appoint directors and hence influence high-level strategic direction.

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What is left of the argument that there has been inappropriate political interference over the OSC? Only the assertion that Ms. Zordel and three other part-time commissioners were appointed without the government having consulted the OSC, as has customarily been done. Yes, it would have been better if the government had consulted the OSC. In all likelihood, however, the outcome would have been the same. The OSC might not like not having been consulted but at best this is a foible not a fiasco.

In the end, this tempest easily fits within a standard-issue teapot.

Financial Post

Jeffrey MacIntosh is a professor of law at the Faculty of Law, University of Toronto, and a director of the Canadian Securities Exchange.

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