China cracks down on its own tech companies
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Illustration: Sarah Grillo/Axios
U.S. tech companies for years have grumbled about how the Chinese government favored its homegrown heroes, largely shielding them from global competition. Now, though, China is turning on its own Big Tech companies, reminding them who's boss.
Why it matters: This complicates U.S. IPO plans for dozens of Chinese companies, and potentially revalues even more Chinese unicorns.
Driving the news: China on Sunday banned DiDi from app stores, just days after the ride-hail giant went public on the NYSE at a $73 billion valuation.
- WSJ reports that Chinese regulators privately urged DiDi to delay its IPO, which the company neither did nor disclosed.
- Per WSJ: "Back in Beijing, officials, especially those at the Cyberspace Administration of China, remained wary of the ride-hailing company’s troves of data potentially falling into foreign hands as a result of greater public disclosure associated with a U.S. listing."
- DiDi shares were down more than 24% at this morning's market open, representing around $18 billion in lost market value.
- Chinese regulators also disclosed cybersecurity investigations into several other companies, including recent U.S. IPO issuer Full Truck Alliance, blocking them from registering new users.
- And there are new reports that Weibo (Nasdaq: WB) is considering a take-private plan amid the crackdown, although the social media company is saying it's untrue.
Flashback: Chinese regulators successfully scuttled an IPO for Ant Financial late last year, just days before it was set to price, albeit for different official reasons.
- The big difference between then and now is that, by letting DiDi and others go public before bringing down the regulatory hammer, China is putting a chill on foreign investor interest in future Chinese tech IPOs. And lots of them are (or were?) expected to hit U.S. exchanges in the back half of 2021.
The bottom line: What a government giveth, a government can taketh away. From both companies and its shareholders.
