After its impressive launch, the Chinese ride-hailing company Didi Global fell more than 10% on the New York Stock Exchange just two days later. This comes on the heels of China’s cyberspace agency announcing an investigation to assess possible security risks. The company made a statement that it plans to comply fully with the government in this matter.
Didi’s Debut on the NYSE
Didi made an impressive debut, raising $4.4 billion from its IPO, though this fell shy of its goal of $10 billion. This was the biggest U.S. listing by a Chinese company since Alibaba in 2014. Until the first quarter of 2021, the company was operating at a loss, but this year they had netted $30 million by the end of March.
Founded in 2012, Didi engaged an estimated 15 million active riders within the past year. In addition to their local operations, Didi provides services in over 15 international markets such as South America, Japan, Australia, Russia, and South Africa. The company has also expanded its focus to include food delivery and the development of autonomous taxis and traffic analysis.
The Result from Didi’s Cyber Attack Risk
While the investigation is underway, Didi has been suspended from registering new users. Otherwise, the company has asserted that its business is operating normally. China has enforced tighter regulations for tech companies in recent years, including a push to improve how they collect, store, and handle sensitive data. Didi gathers a massive amount of mobility data, putting it under special scrutiny from the government.
Didi is the major global competitor for the U.S.-based ride-sharing company, Uber. Interestingly, Didi absorbed Uber’s China branch in 2016 and averaged 25 million rides a day within the first quarter. While most of Uber’s drivers are independent contractors using their own vehicles, Didi’s drivers typically rent cars from fleet companies. Like Didi, Uber has invested resources into developing an autonomous driving division, which they sold in December to the self-driving car startup Aurora.
Why Investments in Small Business’s May Benefit
The sudden drop following Didi’s high debut continues to highlight the unpredictability of investments in big name companies, and the impact of foreign governmental regulations only increases the uncertainty. Lower-profile companies, qualified small businesses, are more likely to escape the same issues. Yet, they sometimes miss the attention of new investors who may be unaware of the benefits that come with smaller businesses.
One such benefit is the federal exemption for qualified small business stock (QSBS). Investors can take advantage of a tax exemption of up to 100% when they sell their QSBS. QSBS Expert can walk you through the IRS qualifications for a small business to help you make better-informed investment decisions.
This article does not constitute legal or tax advice. Please consult with your legal or tax advisor with respect to your particular circumstance.