Didi Chuxing which is the defacto Uber of China finds itself hotter after the Chinese cyberspace regulator orders the various app stores to remove its app. This is potentially a crippling blow to the app which just debuted its IPO in the US.
The Cyberspace Administration of China announced that Didi's global collection and usage of personal information was illegal, but didn't elaborate much further into the charges. The ban came after just two days ago, the regulator said that it was starting a cybersecurity review of the company.
The decision means all the app stores in China - including Apple's App Store, Huawei's and Xiaomi's own store have to remove the app. In China, almost half a billion users utilise the app for ordering rides and other services. Bloomberg is reporting this order has struck Softbank, which is a major investor in the app and its stock fell by 5.9 per cent.
Chinese regulators have been clamping down on homegrown brands who have had outsized power and influence because of the number of users they have acquired. Similar, if not harsher, clampdowns have been triggered against Alibaba, Tencent and the issues against Didi are on the basis of anti-trust to data security. Didi had been struggling with an anti-trust investigation for a while and Tencent which is one of its investors has also been stuck in the eye of the storm.
The Chinese ride-hailing major debuted with a value of $67 billion in the US
Now the Chinese regulator has ordered Didi to clean up its act and take steps to protect the private information of its users. Didi for its part has announced that it has halted adding new users and is now working on fixing the app in accordance with the regulations. It also admits that this move by the Chinese regulator will have a major impact on its revenue.
Didi Chuxing's IPO was led by the Goldman Sachs Group, Morgan Stanley and JP Morgan Chase. It counts Softbank as a major investor. Softbank which has investments in ride-sharing services around the world triggered peacemaking between Uber and Didi Chuxing where the Chinese company acquired Uber's China operation in lieu of a stake in the company.
Didi's debut in the US stock market was also the largest one by a Chinese company after Alibaba, debuting with a market cap of $67 billion.
"This is deeply unfair to investors," Brock Silvers, chief investment officer at Hong Kong-based private equity firm Kaiyuan Capital, said on Friday to Bloomberg at news of the app takedown.
"And as a crucial matter of market integrity, China's regulators should cease allowing companies to list while under investigation," he added.
