DiDi Global Inc (NYSE: DIDI) stock fell another 10% on Thursday morning after China launched a cybersecurity review of the company earlier this week and disabled new users from downloading the app. The Chinese vehicle for hire company debuted on the NYSE last Wednesday but regulatory concerns from Beijing have resulted in investors fleeing the stock over the past few days.
Gina Sanchez: ‘downside is really negative’
On CNBC’s “Trading Nation”, Chantico Global CEO Gina Sanchez said that DiDi shareholders are rightly disappointed at the moment. But what’s more alarming for investors is China’s broader crackdown on the technology sector at large. During the interview, she said:
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Last week, it was Alibaba, and it was antitrust issues. And this week, it’s DiDi, and it’s cybersecurity and national security issues. Here’s the thing; they are talking more than just the use of data and collection of data, but actual cross border transfer of data and national security issues. So, the downside is really negative.
The final blow to investors could come in the form of DiDi “potentially having to delist” its stock in the US market, re-certify itself in the Chinese market, and face “very steep fines,” Sanchez said.
Gene Munster disagrees
Former equity research analyst turned venture capitalist Gene Munster offered a different take earlier this week. He said Tuesday on CNBC’s “Squawk Box” that he has been following Chinese tech companies since 2007 so he can say from experience that DiDi’s regulatory woes are “nothing new.” In fact, DiDi stock’s recent weakness represents a “buying opportunity” for long-term investors — at least based on the valuation.
At a valuation of around $55 billion, DiDi is only 2.75 times more valuable than Lyft Inc (NASDAQ: LYFT) but DiDi faces a much larger current total addressable market of 1.4 billion people versus 330 billion in the US. Munster explained:
And so when you think about a valuation difference in any of these companies, I think you need to look at the addressable market.
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