In China, the approach to Big Tech firms leans, increasingly, toward regulation.
And that might make investing in China’s marquee names, especially on other shores, a bit fraught.
After all, Wall Street, when it comes to gauging the prospects of eCommerce and apps and disruption, lives on growth. And when the road to growth becomes a bit bumpy, sanguine attitudes might turn a bit sour.
Consider the fact that Tuesday (June 29), Didi Global, the ride-hailing juggernaut, goes public. As reported by CNBC, the company is selling 288 million American Depository Shares (ADS) at $13 to $14 each. Valued at the top of that range, the initial public offering (IPO) would raise a bit more than $4 billion, which CNBC said would value the company at $67.2 billion.
At this writing, and out of the gate, the ADRs have yet to trade, but reports indicating that the firm has priced the offering at the higher end indicates at least some positive momentum.
But the enthusiasm on the Street stands in stark contrast to actions in China itself that are bringing Big Tech increasingly under the microscope, and where there are warning signs that even some of the most basic activities that drive revenues (and thus, presumably, valuation) might be hamstrung.
New Legislation In China
As reported in this space earlier in the month, there’s been a slew of new legislation passed in China that would make most data-related activities conducted in the country. That means that firms such as Tencent, Alibaba, and others will make their digitally-focused actions — which includes data collection, as dictated by the Data Security Law — open to government oversight. That means the government will monitor what’s mined and utilized by these Big Tech firms, which touched on eCommerce, social media and other sources.
As had been reported, the Chinese government may be defining the data accumulated as a national asset.
And data, we contend, is the very lifeblood of the app ecosystem, especially as firms seek to broaden their offerings and services.
In The Crosshairs
Didi has not escaped government crosshairs.
As reported back in April, the company was among 13 tech firms in April that had been summoned to meet with the country’s central bank and regulatory agencies. That action, of course, came after Ant Group’s IPO plans had been halted by the government and the company was fined for antitrust violations. With new capital requirements in place, Ant may indeed come public, though with a severely reduced valuation.
More recently, Didi was probed by authorities just ahead of the IPO. As noted earlier in June, the investigation by the State Administration for Market Regulation (SAMR) is part of what has been part of a larger crackdown on “platform” companies in China such as Tencent Holdings and Alibaba. There’s been no comment on either side of the equation — from Didi or the regulators — so we might surmise the investigations are continuing.
Growth is certainly in the cards. As PYMNTS reported, Didi’s filing with the SEC to go public in the U.S. shows the company with 493 million active users each year, 15 million annual active drivers and 41 million average daily transactions.
But where’s there’s uncertainty — at least insofar as government actions might be concerned — a “haircut’ might loom on Wall Street for this firm and for its platform peers. It’s hard to game what happens on the other side of the globe, so to speak, and the push and pull of the bulls and bears here in the caverns of New York City could be pronounced.
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