Why DiDi and Pinduoduo Hurt China Stocks

After Alibaba (BABA) posted very poor quarterly results and forecasted slowing growth, Bloomberg reported that China may ask DiDi to de-list from U.S. exchanges. The rumors come at a bad time.

Investors already sold off China stocks in 2021. The Chinese Communist Party started a regulatory crackdown on technology companies late last year. It imposed fines against Alibaba and disapproved of DiDi’s listing. DiDi did not address security concerns, so it did not get the CCP’s blessing to list on the U.S. market.

Novice investors think DIDI stock will get a go-private price equal to that of the IPO. For DiDi to pay $14 when the stock is half that price is unlikely. It is better off dealing with lawyers suing DiDi for the de-listing. Furthermore, U.S. investors have the limited legal power to get much from DiDi. Still, the case could drag on for years before investors get the $14 price.

Pindudoduo lost 16% of its value on Nov. 26 when it posted non-GAAP EPS of 34 cents. GAAP EPS was just 4 cents, despite revenue growing by 61.7% to $3.34 billion. The revenue result missed consensus estimates by $690 million. The firm’s active monthly active users rose by only 15% Y/Y.

PDD stock may fall to new lows. Once selling pressure ends and the short float of 10.55% shrinks, consider speculating on it.