HONG KONG (BLOOMBERG) — Didi Global has suspended preparations for its planned Hong Kong listing after failing to appease demands from Chinese regulators to overhaul its systems for handling sensitive user data, according to people familiar with the matter.
The Cyberspace Administration of China (CAC) informed Didi executives that their proposals to prevent security and data leaks had failed, the people said. Its main apps, removed from local app stores last year, will remain suspended for the time being, said one of the people, who asked not to be identified because the information is private.
Didi and his bankers halted work on Hong Kong’s listing as it was originally scheduled for listing in the summer of this year, the people said.
In addition to handling the CAC review, Didi is also working to finalize its fourth quarter results, as required for a listing prospectus, they said.
Didi became one of the main targets of a crackdown on the tech sector by Chinese authorities after launching a $4.4 billion initial public offering (IPO) in the United States in June last year.
A few days after its IPO, the company was placed under cybersecurity investigation and its services were removed from Chinese app stores. The ride-sharing giant has since explored several alternatives, including handing over data to a third-party Chinese company and selling a stake to state-backed companies, Bloomberg News reported.
Didi announced in December last year its intention to delist in the United States and pursue a listing in Hong Kong.
The suspension threatens to derail Didi’s plans to move his list closer to home, which would allay Beijing’s concerns about sensitive data leaking overseas.
Now, the CAC’s dissatisfaction with the proposed safeguards is throwing those plans into limbo and raising questions about what penalties regulators might hold for the beleaguered company.
The CAC may release the results of the investigation in the coming weeks, one of the people said. Representatives for Didi and the ACC did not immediately respond to requests for comment.
Didi’s controversial sale of shares sparked a flurry of regulatory actions preventing Chinese companies from raising capital overseas.
The Chinese government has tightened overseas registration rules, introducing requirements that companies with at least one million users must first undergo a cybersecurity review and companies in negative-listed sectors must request a waiver before proceeding with the sale of shares.
Didi’s shares have fallen about 76% from its IPO price. The company disclosed a $4.7 billion loss after its revenue slumped in the September quarter following Beijing’s regulatory assault on the tech sector.
Didi selected Goldman Sachs Group, CMB International Securities and CCB International Holdings to work on its planned Hong Kong listing, Bloomberg News reported last December.