DiDi Global (NYSE:DIDI) is being pushed down this morning by news from the U.S. Securities and Exchange Commission (SEC). After a difficult month for the Chinese ride-sharing giant, an SEC probe threatens to spur more turbulence. The investigation centers around the company’s 2021 initial public offering (IPO), a chaotic debut also tanked by news of a government probe. Now, DIDI stock is back to falling as investors wait for more answers.
What’s Happening With DIDI Stock
DiDi has been struggling since news of the probe broke this morning. DIDI stock fell 7% in pre-market trading and hasn’t stopped its descent since markets opened. As of this writing, it has fallen almost 5% within the first hour of trading. DIDI’s current trajectory seems to be a race to the bottom and doesn’t hint at a turnaround anytime soon.
The last time DiDi dealt with a regulatory probe, it spelled bad news for investors. Let’s take a closer look at what’s happening this time.
Why It Matters
There’s no denying the fact that DIDI stock has given investors a turbulent ride lately. Ever since the company complied with the demands of the Chinese government to start the delisting process from the New York Stock Exchange, shares have been shaky at best. Investors are scheduled to vote on the delisting decision May 23. There is plenty of bearish energy as the important date draws near. However, today’s news poses even worse consequences for investors in the short term.
Regulatory probes never boost a stock, and DiDi’s record is already against it. The company looked poised to take U.S. markets by storm during its 2021 debut on the NYSE. But just two days later, a Chinese watchdog agency announced it would be investigating DiDi due to data privacy concerns. Shortly thereafter, it instructed DiDi to stop accepting new users on the grounds of “national security and the public interest” while its apps were removed from stores. Shares were very quick to plunge.
The fact that the SEC has now launched its own investigation into the controversial DiDi stock IPO is not reassuring. All the company has said is that it is “cooperating with the probe,” providing no additional details. Since it began trading in the U.S., DIDI has been embroiled in controversy, from the first IPO investigation to its compliance with its government over delisting orders. Even if the SEC finds nothing incriminating, by the time it concludes the probe, DIDI stock will have tanked even further. And at less than $2 per share, the stock doesn’t have much room left to fall. This is likely the final nail in DiDi’s coffin, and investors knew it.
What It Means
This bad news comes just on the heels of a semi-positive development. DiDi has not had any company-specific positive catalysts in months. But as InvestorPlace contributor David Moadel reports, China’s government has been discussing plans to support its economy and tech companies. Investors saw this as a small cause for optimism, but the SEC probe more than overshadows it.
It’s not clear what the upcoming delisting vote will mean for DIDI stock. But it is all too clear that the company has no future trading on major U.S. exchanges. DiDi has given investors no reason to be confident in its long-term growth potential and every reason to doubt its short-term prospects. Regardless of the SEC verdict, the ride is over for DIDI stock.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.