The 180-day lockup period preventing Didi insiders from selling their shares in the Chinese ride-sharing giant, which is gearing up to rewind its US IPO and start the whole process over again in Hong Kong, ends Monday.
But unfortunately for any insiders who have been eagerly awaiting the opportunity to finally cash out, Didi (no doubt with the CCP's blessing) is taking steps to ensure the end of lockup doesn't correspond with another deep selloff in the beleaguered firm's shares.
According to the FT, which cited a report in a domestic outlet called LatePost, both current and former Didi employees are being barred from selling any of their shares by indefinitely extending the lockup. It's just the latest example of how flimsy the rule of law is in the People's Republic; instead of being protected by contract law, investors are finding themselves completely at the whims of the CCP. The new rule is tantamount to Didi unilaterally altering a contract with the investors, something that would never be allowed under current US law.
Didi is still unable to sign up new users in China (though millions upon millions of Chinese consumers still use its app, along with millions more in more than a dozen foreign markets).
Yet, this change is the latest setback for employees of the group, which has lost 60% of its value, or about $38 billion in stock market capitalization, since its disastrous $4.4 billion IPO in New York, which was followed up two days later by an epic rug-pull by the CCP when it announced its crackdown on the firm.
Didi announced its plans to reverse its US IPO and instead re-list in Hong Kong earlier in December. Several employees reportedly told the FT that morale at the company is very low, and that employees are anxiously awaiting the end of Beijing's investigation.
Unfortunately for those same investors, the ban on post-lockup selling wasn't enough to prevent another sharp leg down in Didi's shares: the firm's shares were off 3% in premarket trading.
The FT managed to speak with a few current and former employees who shared their views on the decision to extend the lockup.
- "There are definitely going to be a lot of disappointed people with this," said Li Chengdong, head of ecommerce think-tank Haitun. "If you’ve grinded for three or four years and now there’s no date set for the Hong Kong IPO...probably for some employees they won’t want to wait any longer, maybe they will leave," he said.
- However, one former staffer on the operations team said he was not bothered by the delay. "I wasn’t planning on selling at these prices anyway," he said. "It’ll go back up someday."
The news also weighed on shares of SoftBank, a Japanese telecoms conglomerate with a VC arm attached that remains Didi's biggest backer. SoftBank's market cap has also faced significant pressure in recent months due to the situation with Didi.