Didi sinks for third day as analysts eye short sellers


A man walks past the headquarters of the Chinese carpooling service Didi in Beijing, China on July 5, 2021. REUTERS / Tingshu Wang

July 7 (Reuters) – Analysis firm S3 Partners on Wednesday warned of a further increase in short sales of Chinese companies listed in the United States, as a Beijing crackdown resulted in a third consecutive day of selling of the carpooling giant Didi.

Shares of Didi Global Inc (DIDI.N), which are only on their fifth day of listing in the United States after what appeared to be a successful launch in New York last week, fell 4.7 %.

It has now disclosed $ 14 billion, or about 20% of its market value, since an initial round of announcements from Beijing on Friday, according to Reuters calculations.

China’s market regulator on Wednesday fined internet companies such as Didi, Tencent Holdings Ltd (0700.HK) and Alibaba Group Holding Ltd (9988.HK) for failing to report M&A deals previous ones for approval. Read more

Alibaba shares fell about 0.3%, while Tencent’s fell 1.9%.

S3 pointed out that the crackdown on domestic listed companies in the US market could be the trigger for a new wave of short selling on these stocks, after the bears were forced to close some positions earlier this year.

Short-term interest in the group fell to $ 43.5 billion from $ 50.6 billion this year, while short-term interest as a percentage of free float fell to 3.81% from 5, 67%, reflecting the closing of some positions that were in the red after a market rally in January. and February, Ihor Dusaniwsky, general manager of predictive analytics at S3, said in a report.

However, shorts, the bets that stocks will drop in the future, are now broadly profitable for the year, suggesting that there is now room for hedge funds and other speculators to bet on more losses. after the crackdown launched last week.

“For Didi, the situation is grim, but for Chinese companies preparing to list in the United States, it could be even darker,” said Samuel Indyk, senior analyst at uk.Investing.com.

“As the risk of investing in Chinese technology in the United States increases, the ability of Chinese technology companies to raise capital decreases with it, making listings in the United States less attractive in the future. “

S3’s Dusaniwsky said the market should expect more short selling and a reduction in “short hedging” – the market jargon for closing positions, normally those that are in the red.

Invesco Golden Dragon China ETF, which tracks U.S. listed companies headquartered in China, has lost a third of its value from its February high, meaning short sellers who bet against the index during this period should have taken advantage.

In a sign of investor nervousness over Didi, index publisher FTSE Russell also warned that it would not include Didi shares in its global stock indexes if trading was halted during Wednesday’s session. Read more

The funds compare trillions of dollars in assets to the FTSE Russell indices and, by size, Didi should otherwise be included.

Worth around $ 60 billion, Didi is the largest US listing of a Chinese company since 2014. The market capitalization of US company Uber Technologies (UBER.N) was $ 95 billion. Read more

Reporting by Medha Singh and Akanksha Rana in Bengaluru; Editing by Patrick Graham and Shounak Dasgupta

Our standards: Thomson Reuters Trust Principles.


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