The Chinese government is encouraging government-run firms to invest in the Chinese ride-hailing company, Didi, as Beijing considers taking over control of the publicly traded Chinese technology giant, Bloomberg News has reported.
It appears Beijing is seeking to obtain complete control over one of its largest tech companies and the data it holds and collects.
In a preliminary proposal, Beijing has encouraged companies, including the Shouqi Group and state-owned Beijing Tourism Group to acquire a stake in Didi.
If the proposal was implemented, the Shouqi Group, which owns and operates another ride-hailing service in China, would be expected to play a role in helping operate its larger rival, Didi.
Didi is facing a cybersecurity investigation by Chinese authorities that was announced shortly after its New York initial public offering (IPO) in June of this year.
“Other scenarios being considered include the consortium taking a nominal share, accompanied by a so-called ‘golden share’ with veto power and a board seat,” Reuters reported.
A “golden share” arrangement would put Beijing in a similar investment position as it has with TikTok-owner Bytedance. The difference being that ByteDance is not a publicly traded, U.S.-listed company.
Following word of the proposal, shares in Didi rose by 1.7 percent to trade at US$ 8.96 on the New York Stock Exchange (NYSE) on Friday afternoon.
Some investors, believing the move would eliminate regulatory uncertainty, welcomed the news, while others raised questions concerning how Didi could accomplish such a feat while remaining a U.S.-listed company that has to abide by rules set by the U.S. Securities and Exchange Commission (SEC) and the NYSE.
Justin Tang, head of Asian research at investment advisor United First Partners in Singapore told Reuters, “We were expecting some action but not to this level of magnitude. The big question is what will happen to Didi’s investors?”
Legal experts have said that Beijing has never taken control of a U.S.-listed company before and have suggested that the Chinese government may have to assume control of an entity in China that holds Didi’s operations but not the holding company of Didi, which is based in the Cayman Islands. In essence, in order for Beijing to seize Didi, another company — responsible for Didi’s operations — may need to be created in order to comply with SEC and NYSE rules.