Chinese ride-hailing firm has bagged two lawsuits in the US less than a week after regulators told the firm to remove its app from Chinese app stores due to its illegal collection of users data. The sanction came two days after the Chinese cybersecurity regulator announced that it had begun investigating Didi on July 2.
The result of the order was a decline in the company's US market value by more than 20 percent a week after the company made its debut on the US stock exchange market. The company lost more than US$15 billion in market capitalisation on Tuesday alone when its shares dropped 20 per cent. Its stock price closed down 4.6 per cent at US$11.91 on Wednesday in New York. (SCMP)
The lawsuits which were filed yesterday in New York and Los Angeles on Tuesday say Didi failed to disclose ongoing talks it was having with Chinese authorities about its compliance with cybersecurity laws and regulations.
The suits named Chief Executive Officer Will Wei Cheng, President Jean Qing Liu and several other executives and directors. Lead underwriters Goldman Sachs, Morgan Stanley and JPMorgan Chase & Co., were also named as defendants.
Although Didi stated the risk factors associated with doing business with a Chinese firm subject to Chinese regulation in its IPO prospectus, the suits said the company did not specify the ongoing talks with regulators in Beijing. Bloomberg reported that the Chinese regulators asked Didi to delay its IPO due to cybersecurity concerns as long as three months ago, citing people who are familiar with the matter.
A shareholder Rafael Espinal said in the New York suit "Rather than disclose the unknown discussions into the company's practices and non-compliance with relevant technology laws, the registration statement vaguely discussed China's regulatory regime with regards to data security" Shareholder Rafael Espinal said in the New York suit
The ride hailing firm in its prospectus also warned investors in its prospectus that their ability to protect their rights through the U.S. courts may be limited, because they are incorporated under Cayman Islands laws.
Didi did not immediately respond to a request for comment on Thursday. Goldman, Morgan and JP Morgan declined to comment on the suit, Bloomberg reported.
China in focus
GDP: $14.723 trillion in 2020 compared to $14.28 trillion in 2019
Population: 1.402 billion in 2020 compared to 1.398 billion in 2019
GDP per capita: $11,417 in 2020 compared to $10,925 in 2019