Weekly Digest: Big Trouble for China’s Tech Companies

Welcome to your Sunday digest…my weekly breakdown of the things we’re thinking about and talking about in the Global Intelligence world. 

First up this week, big trouble for China’s tech companies.  

On June 30, Chinese ride-hailing firm Didi Global made its much-anticipated debut on the New York Stock Exchange.  

The company, which is China’s answer to Uber, enjoyed a solid if unspectacular debut. On its first day of trading, its shares closed 1% higher than the $14 offering price. That gave the company a valuation of around $68.5 billion.  

Overall, Didi managed to raise some $4.4 billion from its IPO. This was the biggest debut by a Chinese firm since e-commerce giant Alibaba way back in 2014. All told, not a bad beginning.  

Then, two days later, the wheels came off. 

Didi’s listing in New York seems to have drawn the ire of Chinese regulators, who have since accused the company of mishandling user data.  

As a result, Didi was ordered to stop adding new users and then kicked off app stores in China entirely (though it can still serve existing customers).  

This is a massive deal.  

Didi is a huge operation. It has more than 375 million users in China. The company also has about 15 million drivers who rely on the service for some or all of their income. 

Didi has promised to try and rectify any problems with its data collection, but there is now a big question mark hanging over the future of the company. And as of writing, its stock price has fallen to around $11, well below its $14 offering price.  

The company’s IPO has been nothing short of a debacle for investors, and more worryingly, it’s also part of a larger trend.  

Didi isn’t the first Chinese company to experience a rebuke shortly after listing in the States. Full Truck Alliance, a truck-hailing service, and Kanzhun, a job listing company, were also targeted by Chinese regulators this year not long after debuting in New York. 

What these moves indicate is that the Chinese government’s crackdown on tech companies has entered a new phase.  

China’s Communist Party, which celebrated its 100th anniversary last week, has zero interest in sharing power, and in recent years seems to have grown increasingly nervous of the country’s emerging tech sector…most especially those companies that operate in fields related to big data and artificial intelligence.  

Now, the party is sending a clear message: Companies that try to go global too quickly or without its express permission will be slapped down. And this means that savvy investors should steer clear of any Chinese data companies that list outside of China or Hong Kong for the foreseeable future. 

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Next up, crypto.  

The world’s largest cryptocurrency exchange, Binance, is all over the news these days, and for all the wrong reasons. 

Just this month, the U.K. Financial Conduct Authority (sort of like America’s Financial Industry Regulatory Authority, or FINRA) has banned Binance from conducting any regulated activity in Britain. 

Days earlier, Binance proactively pulled out of Ontario, Canada, as Canadian regulators cracked down on other exchanges that are allegedly in violation of local laws. Back in May, meanwhile, U.S. regulators began probing Binance for money-laundering and tax evasion—not by Binance itself, but by some of its customers.  

Ultimately, these are the growing pains of a new financial industry. I bring them up not to talk about the regulatory issues per se, but about Binance itself—and, more specifically, Binance.US, the San Francisco-based crypto exchange I recommend to most people.  

Binance the parent company (based in the Cayman Islands) is the one facing all these issues. Binance.US is not. It’s regulated in the States and isn’t the subject of all the Binance news you’re seeing. 

My bet is that Binance (the parent) will regroup and begin the process of registering and meeting all the regulatory rules it must in order to serve Europeans, Canadians, and others. The opportunities are just too big to back away from those markets, particularly Europe. 

Let me add that Binance’s U.K. woes did not ruffle the crypto market in the slightest. So, to me, the Binance matter is pretty much a non-issue to the cryptoconomy. Even if Binance went away (and it assuredly won’t) there are plenty of regulated exchanges providing broad access to crypto. 

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Finally, this week a personal update. 

Tomorrow, I’m getting my second COVID shot and on Wednesday I’m departing for Malta, where I’ll be researching some investment opportunities for us and checking out some of the sights and sounds of the Mediterranean island.  

Malta will be country #69 for me, by the way, and I’m immensely excited to be traveling again. 

Ahead of the trip, I’ve been scanning through my camera and reviewing some of the photos I’ve taken on past overseas excursions. 

Regular readers might know that I have a lifelong passion for photography and earlier this year, challenged myself to upload more of my photos to micro-stock sites.   

If you haven’t heard of these sites, they offer a way for anyone to sell their photos online. All you have to do is create an account, upload your images for free, and buyers from around the world (from blogs, magazines, advertisers, etc.) can view and purchase them. 

I know people who make some real cash this way, and I’m determined to follow suit this year, since it seems genuinely fun. So, I’ve been busy uploading some of my images to one particular site and now have over 200 images on there.  

Here are two I’ve uploaded recently: 

I’m excited to see how they do. Hopefully, they will start bringing in a little cash. And I plan to add more from my Malta trip once I return. 

With that, I’ll bid farewell this week. Many thanks for reading. I’ll send you some updates from Malta. And if you have any feedback or questions, please feel free to contact me through the contact form on the Global Intelligence website here. 

Enjoy the rest of your Sunday.