Ride-hailing company DiDi Global (DIDIY) has received approval from China’s cybersecurity regulator to resume new user registrations following a ban that lasted for one and a half years. The announcement is the latest indication of China easing its crackdown on tech giants in a bid to boost its economy, which has been severely hit by the COVID-19 pandemic.
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“Our company has earnestly cooperated with the country’s cybersecurity review, seriously dealt with the security problems found in the review and carried out comprehensive rectifications for more than one year,” the company said in a statement, per Reuters.
DiDi’s Regulatory Woes
Launched in Beijing in 2012, DiDi was backed by prominent investors, including Alibaba (BABA), Tencent Holdings (TCEHY), and SoftBank Group (SFTBY). The company ran into trouble when it went ahead with the U.S. listing of its shares in 2021, reportedly against the will of China’s key regulator – The Cyberspace Administration of China (CAC).
Just two days after DiDi’s NYSE listing, CAC started an investigation into the Chinese ride-hailing giant to assess data security-related risks and any compliance issues with China’s national security and cybersecurity laws. DiDi was forced to take down its 25 mobile apps from app stores and suspend the registration of new users.
DiDi also delisted its American depositary shares (ADS) from NYSE in June 2022 in the wake of the investigation and moved to the U.S. over-the-counter market. The probe ended in July 2022 and the company was fined $1.2 billion for violating cybersecurity, data security, and personal information protection laws.
The regulatory crackdown hurt DiDi significantly and impacted its dominance in the ride-hailing space. The company lost ground to rival ride-hailing services operated by automakers SAIC Motor and Geely (GELYF). DiDi and its peers were also hit by COVID-led lockdowns in China. With the regulatory headwinds in the rearview, the company might regain its mojo in the days ahead.
Is DiDi Global a Buy or Sell?
DIDIY stock has rallied nearly 30% since the start of 2023, thanks to the improved sentiment about Chinese stocks. Nonetheless, it will be prudent for conservative investors to wait for DiDi Global’s business to recover before making any investment decision.
