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Senators call on US securities regulator to investigate Didi IPO

Two senior members of Congress have called on the Securities and Exchange Commission to investigate whether Didi Chuxing, the Chinese ride-sharing company, misled American investors ahead of its initial public offering last week.

The senators, who sit on the powerful senate banking committee, said they wanted the SEC to examine whether Didi was forthcoming enough about its contact with Chinese regulators prior to the listing of its shares.

Shares in Didi have slumped by more than a quarter during the first week of trading on the New York Stock Exchange, after the Chinese internet regulator ordered its app be removed from domestic stores over concerns about data security. The stock price decline has prompted shareholder lawsuits.

In a statement to the Financial Times, Bill Hagerty, the Republican senator from Tennessee, said: “The Biden Administration and the SEC — whose core mission is to protect investors and maintain fair markets — should look into whether American investors were misled.”

He added: “The SEC must enforce its transparency and disclosure rules, and American investors need to be fully aware of the inherently different risks of investing in companies from non-market, government-controlled economies such as China.”

Chris Van Hollen, the Democratic senator from Maryland who sits on the banking committee with Hagerty, said US investors needed “confidence that the companies that list on US exchanges are not engaging in fraud”.

Hollen said shareholders “should have access to information on the risks posed by investing in foreign companies — especially those influenced by foreign governments”.

He added: “The SEC should thoroughly investigate this incident to see if investors were intentionally misled by Didi’s public disclosures.”

Jen Psaki, the White House press secretary, said on Thursday it was “essential that all companies that list in the US adhere to high standards of transparency and disclosure”. But she would not be drawn on whether the SEC should investigate Didi, citing the regulator’s independence.

The SEC declined to comment.

Didi raised $4.4bn at its IPO last week in the biggest Chinese offering in the US since Alibaba in 2014. Within days, the Chinese internet regulator said the company had “problems of seriously violating laws on collecting and using personal information”.

One person close to the company has since admitted the Chinese regulator advised it to delay its listing, although the company denies it had knowledge of the impending regulatory crackdown.

The Financial Times revealed on Thursday that the internet agency also made more than 20 requests for changes to the app before the listing, which the company then made.

The botched IPO has prompted questions over what Didi told US investors before it went public. The company said in its listing document filed with the SEC that it had participated in a meeting in May with Chinese regulators, including the cyber space administration, alongside 30 other big Chinese internet companies. But it did not specifically mention any requests to change its app or delay its IPO.

Joseph Grundfest, a Stanford Law School professor and a former SEC commissioner, asked: “When did Didi know that it was exposed to regulatory risk? And even if Didi didn’t know for certain at the time of the IPO that its app would be banned, why didn’t it disclose that risk in its prospectus?”

He added: “The SEC and private party plaintiffs will aggressively question Didi’s disclosures.”

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