Authorities in China are preparing to amerce a fine of more than $1 billion on transportation company, Didi Global. With over 550 million customers and tens of millions of drivers, Didi Chuxing Technology Co. is a Chinese car-for-hire firm with its headquarters in Beijing. According to reports, the fine can lead to an end to a probe into the company’s cybersecurity practices.
The fine would be more than 8 billion yuan, equating to 1.28b USD. The imposed fine would make up 4.7% of the company’s $27.3 billion total revenue from last year. Didi’s fine would be the highest regulatory penalty ever on a Chinese tech company since China’s antitrust authority levied fines of $2.75 billion and $527 million against Meituan (3690. HK) and Alibaba Group (9988. HK) Meituan’s fine was 3% of its 2020 domestic sales. In contrast, Alibaba’s sanction was nearly 4% of its 2019 domestic sales.
The Chinese government plans to lift restrictions such as preventing Didi from adding new users to its platform and permitting restoring its apps on domestic app stores in response to Didi’s penalty.
Interestingly, this is not the first time Didi has prepared for a potential fine. According to Reuters, “Didi, co-founded in 2012 by former Alibaba employee Will Wei Cheng and backed by SoftBank Group (9984.T) and Uber Technologies (UBER.N), previously set aside 10 billion yuan for a potential fine, Reuters previously reported.”
After upsetting Chinese officials by proceeding with its $4.4 billion New York IPO in June 2021 despite being urged to postpone it, the company has battled to have its business achieve a level of normalcy.
The Cyberspace Administration of China ordered app shops to delete 25 Didi-operated mobile apps and initiated a cybersecurity investigation into the company’s data practices. Competitive services for Didi, operated by Geely (GEELY.UL) and SAIC Motor (600104.SS), have gained market share due to the limitations.
The company declared in December that it would delist from the New York Stock Exchange, and its shareholders approved the move in May. During its first public offering (IPO), Didi’s shares skyrocketed, giving the business an $80 billion valuation. In 2014, it was the largest U.S. IPO by a Chinese company.
