The Data Dispute Behind Didi's U.S. Listing, Domestic Penalties and Overseas Litigation

Didi had just gone public in the US on June 30, only to be placed under national security review by the Cyberspace Administration (CAC) shortly after.

On July 4, Didi was removed from the app store.

On July 6, Didi's stock price plummeted nearly 20%, wiping out $14 billion in market value.

On July 7, it was revealed that Didi had officially been sued by a U.S. law firm in a class-action lawsuit.

Has Didi recently entered the Mercury retrograde phase?

1. Does Didi provide sensitive data to the US for listing?

There are rumors online that Didi was fined for packaging sensitive user and road data into the United States. Didi's vice president has already stated online that this is a rumor:

Personally, Ibelieve the Vice President's statement. If a Chinese company dares to disclose data related to national security to the U.S. during its IPO approval, it must be because the executives have been kicked out of their heads

In the Cyberspace Administration's notice about Didi's removal from shelves, the wording used was "the app has serious illegal and irregular collection and use of personal information," without claiming that Didi's actions endangered national security. It can be inferred that this does not constitute fact.

2. Why impose heavy fines on Didi?

If we want to investigate illegal personal information collection, probably not a single Chinese internet company is 100% compliant. Why deal with Didi?

On the surface, it appears to be personal information, but behind it lies a national security issue.

Didi has not leaked sensitive information yet, but that does not mean it will not be leaked after listing in the United States.

Why?

Because the U.S. now holds a powerful weapon—

In March this year, the U.S. Securities Exchange (SEC) passed the final amendment to the Holding Foreign Companies Accountable Act. This bill is considered to be designed specifically for Chinese concept stocks. Under this law, the SEC has the authority to conduct routine inspections of companies listed in the United States.

If the SEC requires Didi to provide various data for inspection under the pretext of protecting investors' interests, and Didi cannot violate this requirement, it will not be allowed to delist.

As a domestic travel giant, Didi hires the most expensive professional intermediaries for its IPO, so it's impossible to understand the power of the SEC's bill.

Moreover, the listing in the US was chosen at 00:45 Beijing time on June 30, the eve of the government's centennial celebration, and in the middle of the night. This deliberate low-key approach clearly aimed to avoid attracting domestic attention and quietly making big money.

3. Why do we know there are tigers in the mountains, yet we still head toward them?

Knowing the power of the SEC bill and at such a critical moment of strained China-US relations, why would Didi take such a huge risk to list in the US?

Of course, it's for profit.

Didi's top two shareholders are SoftBank and Uber, holding 21.6% and 12.8% respectively.

Didi has been established for nine years, and Yang'er has grown fat. The best way out for capital cashing out is, of course, to go public.

If listed domestically, not only is it required to be profitable for three consecutive years, but exporting RMB abroad is very troublesome; If listed in the US, there would be no issue of capital outflow, valuations higher than Hong Kong's capital market, and it would help the company expand into global markets. It would be the optimal choice for both shareholders and the company.

But once private interests conflict with the nation's public interest, they run into conflict.

4. Legal issues behind Didi Data

Let's first take a look at the data Didi has in hand:

First, massive amounts of personal travel data:

Didi has nearly 500 million users and over 40 million daily orders. Besides ordinary citizens, the daily travel data of soldiers and staff with special identities is also included. Using modern technology, it is easy to extract valuable information from massive user data and make use of it.

Second, road data:

As early as 2017, Didi subsidiary Ditu Technology applied for a national high-precision map surveying license. The sensitivity of street data goes without saying, and if foreign governments had access to it, it would truly endanger national security.

Let's take a look at what cybersecurity review means.

The cybersecurity review conducted by the Cyberspace Administration of Didi is defined by the relevant provisions of the "Cybersecurity Review Measures" (Cyberspace Administration of China Announcement No. 6, hereinafter referred to as the "Measures"), and specifically includes:

Article 2 Operators of critical information infrastructure (hereinafter referred to as operators) who procure network products and services that affect or may affect national security shall conduct cybersecurity reviews in accordance with these Measures.

Article 19: If operators violate the provisions of these Measures, they shall be dealt with in accordance with Article 65 of the Cybersecurity Law of the People's Republic of China.

Article 65 of the Cybersecurity Law of the People's Republic of China stipulates: