Didi shares fell more than 10% in premarket trading Friday morning after China, where the company is based, announced a cybersecurity assessment of the company.
According to an English translation of the Chinese announcements, new users will not be able to register for Didi’s ride hailing service during the country’s cybersecurity assessment.
China’s move comes just two days after Didi held his IPO on the New York Stock Exchange. The stock was on the cusp of another day of gains after rising nearly 16% on Thursday. Didi’s shares rose about 5% in premarket trading before China made its announcement.
Didi said in a statement “to fully cooperate” during the review.
“We plan to conduct extensive research into cybersecurity risks and continuously improve our cybersecurity systems and technology capabilities,” a spokesperson told CNBC in an email.
China’s announcement also reflects a broader trend of the company’s regulatory crackdown on technology companies based there that were once loosely regulated. In June, Reuters reported that Chinese regulators were investigating Didi for antitrust violations. It is also reportedly investigating the company’s pricing mechanism.
And last fall, Ant Group’s IPO in Shanghai and Hong Kong was postponed after Chinese regulators stepped in and interviewed the company’s top executives, including chairman Jack Ma. Regulators fined Alibaba $2.8 billion in April for abusing its market dominance.
Didi had warned in its IPO prospectus that it was meeting with regulators earlier this year, along with several other Chinese internet companies. The ride-hailing company said they may face sanctions as regulatory authorities may not be happy with the inspection results.
“We cannot assure you that regulatory authorities will be satisfied with our self-inspection results or that we will not be subject to any fine related to violations of anti-monopoly, anti-unfair competition, pricing, advertising, privacy protection, food safety, product quality, tax and other related laws and regulations. We expect these areas to receive greater and continued attention and scrutiny from regulators and the general public in the future,” the company said in its prospectus.
Founded in 2012, Didi said it has 493 million active riders annually and 41 million average daily transactions. It started expanding internationally in 2018 and the company now operates in 14 countries outside of China.
In addition to traditional taxi transport, Didi invests heavily in the realization of autonomous taxis and operates various segments around mobility.