Didi, the Chinese ride hailing behemoth that has undergone a year of regulatory overhaul, faces a fine of over 8 billion yuan ($1.28 billion) from the country’s authorities, The Wall Street Journal and Reuters reported.
The company did not immediately respond to a request for comment. Along with the fine, the regulators will also allow Didi to restore its app to domestic app stores and proceed with its plan to list its shares on the Hong Kong Stock Exchange, according to the reports.
If the move materializes, it could wrap up a year of turbulence at SoftBank-backed Didi, once celebrated in China as the ride share darling.
The fine is no small number, accounting for about 4.7% of Didi’s 174 billion yuan in revenues last year, but it can be read as a win-win in which the authorities show who’s in power and Didi gets to gradually head back to business as usual, albeit under much more oversight.
What happened to Didi?
Last July, the Chinese government launched a data security probe into Didi just days after the company raised $4 billion from its first sale of stocks in New York. The regulators also yanked its app from Chinese app stores, saying it was “illegally collecting user data.”
Neither Didi nor the regulators elaborated on what was “illegal”, but media reports and a memo viewed by TechCrunch all pointed to the firm’s failure to assure Beijing that its data practices were secure before going public in New York, which could involve sharing data with U.S. regulators.
At the time, Didi was the largest mobility platform in China with over 500 million annual active users, which are by law real-name verified in the country, meaning the company had access to reams of geolocation data that could be deemed sensitive.
Didi began working on delisting from the New York Stock Exchange in December and by May, the deal was sealed. It’s now turning to Hong Kong, which has in recent years attracted a slew of secondary listings by Chinese tech giants trading in the U.S. — Alibaba, JD.com, and Baidu, to name a few — as tensions between China and the U.S. heighten.
In recent months, the U.S. has added dozens of Chinese tech firms, including microblogging giant Weibo, to a watchlist of companies that could be delisted if they fail to comply with the Securities and Exchange Commission’s auditing requirements.
Exactly how Didi has remedied its data security framework is unclear, but its experience will offer a playbook to other homegrown data-intensive tech firms pursuing public investors outside mainland China. Robotaxi company Pony.ai, one of China’s highest valued startups, reportedly put its SPAC plans in the U.S. on hold because it was facing similar cross-border data challenges.