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A man walks past the headquarters of Chinese ride-hailing service Didi, in Beijing, on July 5, 2021.

TINGSHU WANG/Reuters

Didi Global Inc. shares fell as much as 25 per cent in early U.S. trading on Tuesday in the first session since Chinese regulators ordered the company’s app to be taken down days after its US$4.4-billion listing on the New York Stock Exchange.

The ride-hailing giant’s app was ordered to be removed from mobile app stores in China on Sunday by the Cyberspace Administration of China (CAC), which had said it was investigating Didi’s handling of customer data.

The CAC on Monday also announced cybersecurity investigations into other Chinese companies whose parents have listed in the United States, and those parents’ shares also slid.

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Full Truck Alliance was down about 18 per cent, and Kanzhun Ltd. was down about 12 per cent.

The U.S. market was closed on Monday following the July 4 holiday.

Didi Global shares were last trading at about US$11.97 – a fall of more than US$17-billion in market capitalization from Friday – and well below their debut price of US$16.65 on June 30.

The Wall Street Journal reported on Tuesday, citing sources, that the company had been warned by regulators to delay the initial public offering and examine its network security.

“With some news sources saying that Didi knew months in advance that a crackdown was coming, some people will start to have their doubts on governance of the company as well,” said Sumeet Singh, Aequitas Research director who publishes on Smartkarma. “If the crackdown was indeed planned months in advance, that would imply that it’s not going away soon.”

Didi said on Monday that the app’s ban would hurt its revenue in China, even though it remains available for existing users. It also told Reuters it had no knowledge of the investigation prior to the IPO.

Didi shares were sold at US$14 each in the IPO, which was the largest listing of a Chinese company in the U.S. since Alibaba Group Holding Ltd. raised US$25-billion in 2014. The company had been valued at up to US$75-billion as of Friday.

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CAC said it had ordered stores to stop offering Didi’s app after finding the company had illegally collected users’ personal data.

“Some investors may have taken comfort that going ahead with the listing was under the blessing of the authorities, when now we know it clearly wasn’t,” said Dave Wang, portfolio manager at Singapore’s Nuvest Capital. Nuvest did not participate in Didi’s IPO.

Market watchers said the news could have other ramifications.

Mitchell Kim, an independent research analyst based in New York who publishes on Smartkarma, said he was concerned about the potential regulatory overreach.

“Over the last few years, we have witnessed the Chinese government’s gradual tightening of control over the new economy, in particular, the internet sector.”

Matthew Keator, managing partner in the Keator Group, a wealth management firm in Lenox, Mass., said: “In light of some of the recent news, investors need to be looking at not just valuations of the company based on global opportunities, but keeping in the back of their mind that policies could go into effect and how will that affect companies here in the [United States].”

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