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London (CNN Business)Talk about buyer's remorse.
Didi's stock dropped 20% on Tuesday as Chinese officials launched an inquiry into the ride-hailing behemoth, which raised $4.4 billion in a big IPO in New York last week.
For investors, the bungled IPO is bad news. It's also bad for the New York Stock Exchange, which is embroiled in a push by US legislators to prohibit Chinese firms from raising capital in the city.
The political repercussions were immediate. Sen. Marco Rubio, a Florida Republican who is a vocal opponent of China's government, told the Financial Times that allowing Didi to sell stock was "reckless and irresponsible."
"Even if the stock rises, American investors will still be unaware of the company's financial strength because the Chinese Communist Party prevents US regulators from inspecting the books," Rubio told the UK daily. "This puts American seniors' money at danger and sends vitally needed US dollars to Beijing."
For months, the political atmosphere around US company listings has been charged. In November, former President Donald Trump signed legislation prohibiting Americans from investing in companies that the US government believes are controlled or owned by the Chinese military.
As a result, several Chinese companies, including China Mobile, China Telecom, and China Unicom, were compelled to delist from US exchanges. President Joe Biden has taken a similar tack, tightening prohibitions on US investment in Chinese firms suspected of having military ties.
s to listing in New York:
- Superior liquidity
- A massive investor base
- Streamlined listing process
- Because American investors are used to working with startups, a US listing is even more appealing to Chinese tech companies. Furthermore, US markets allow a broader range of valuation methods.
- In recent years, Hong Kong has attempted to steal business from New York by pushing Chinese companies to sell shares in the city in so-called "homecoming listings."
- New York, on the other hand, has a powerful draw. According to Jefferies, ten Chinese companies completed US IPOs in 2020, accounting for over 20% of the market (excluding SPACs) - the largest percentage of IPO issuance in the US since 2010.
- Didi was an extension of that pattern. Since Alibaba's launch in 2014, it was the largest US IPO by a Chinese business.
- Is it the end of an era? The United States isn't the only one exerting pressure. China announced on Tuesday that it would tighten regulations for foreign-listed companies, putting even more pressure on Didi.
- The government has stated that illicit securities activities such as fraudulent share issuance, embezzlement, and market manipulation will be severely punished. Securities fraud was prevalent in international markets, according to the report.
- Is New York going to be the next Alibaba or Didi? Keep an eye out for updates.
Pentagon scraps huge cloud contract in blow to .MicrosoftUnder the Trump administration
Under the Trump administration, the US Department of Defense has cancelled a contentious $10 billion cloud computing deal that had been granted to Microsoft over Amazon.
The Joint Enterprise Defense Infrastructure (JEDI) contract was cancelled by the Pentagon on Tuesday. Instead, it will seek new solicitations from Amazon and Microsoft for a revised contract.
Microsoft would have built a cloud storage system for sensitive military data and technology for the Pentagon under the JEDI deal, which could have brought in up to $10 billion in income over ten years.
The fact that Microsoft won the ntract coover Amazon in 2019 sparked significant controversy, since many industry professionals expected Amazon to win the contract.
The backlash: Amazon filed a lawsuit in the United States Court of Federal Claims, claiming that the decision was politically motivated by former President Donald Trump's disdain for Amazon CEO Jeff Bezos and his newspaper, the Washington Post, which Bezos owns.
In a press release, the Pentagon stated that it opted to cancel the contract because to "changing requirements, greater cloud conservancy, and industry improvements." As a result, the JEDI contract "no longer fits its demands," according to the press statement.
What happens next: The department said it would solicit proposals from Microsoft and Amazon Web Services and will also accept proposals from other Cloud Service Providers that "can also meet the DoD's requirements."
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