Didi will launch a delisting vote, what should stock holders do? One article to understand the voluntary delisting mechanism of US stocks

On April 16, Didi (DIDI.US)$ announced that it will hold an extraordinary general meeting of shareholders at 19:00 on May 23, 2022 to discuss the voluntary withdrawal of the company’s American depositary shares on the New York Stock Exchange. The company will not apply for listing of its shares on any other stock exchange until the delisting is completed.

Didi announced that at the extraordinary general meeting, shareholders of Didi’s Class A and Class B ordinary shares will vote with one vote per share. Didi will continue to experiment with the possibility of listing on another internationally recognized exchange.

In this regard, the CSRC responded that this is an independent decision made by the enterprise based on the market and its own situation. The CSRC has always insisted that the overseas listing activities of enterprises should abide by the laws, regulations and supervisory rules of the places where they are listed and where they operate, and require listed companies to effectively protect the legitimate rights and interests of investors, especially small and medium investors. The specific case of Didi’s voluntary delisting has nothing to do with other US-listed Chinese concept stocks, and has nothing to do with the ongoing Sino-US audit and supervision cooperation consultations, and does not affect the cooperation process between the two parties.

What information is behind the announcement worth paying attention to?

First of all, according to the analysis of market participants, according to the announcement released by Didi’s official website, since Didi will not apply for listing on other exchanges before it completes its delisting, it will eliminate the need for shares to be listed on other exchanges first, so as to ensure seamless handover of US stock investors. The idea of ​​​​that the current holding shareholders will always hold the shares. If they want to trade after delisting, they will trade on their own in the OTC pink sheet market. According to the announcement, after the delisting is completed, shareholders who hold the company’s ADS or common shares may trade in the OTC pink sheet market, and Didi will not involve in it.

Due to the increase in transaction difficulty, general investors will be less willing to vote for delisting, and there is no mention of privatization at an ideal price. If the delisting vote is passed, there will still be pressure on the stock price. The announcement pointed out that next Thursday (April 28) is the last day for the company to determine which shareholders will have voting rights in the May 23 delisting resolution.

In addition, some analysts pointed out that Didi’s announcement mentioned that this is voluntary delisting, not privatization (Private transaction), nor open-market purchases. There is a big difference here. There is no reserve price for voluntary delisting. As long as there is a shareholder resolution, delisting can be done.

As for shareholders’ willingness to vote? According to the Hong Kong Economic Times, at present, Didi ADS issues 4.354 billion Class A shares, 1 common share is equivalent to 4 ADS shares, that is, 1.0885 billion common shares, and 117 million Class B shares, originally 10 votes per share, but When voting for delisting, both Class A and Class B shares have one vote, or 1.206 billion votes.

For institutional investors, GALILEO (PTC) LTD holds 75.884 million ADSs, or 18.97 million ordinary shares or 1.57%, DAVIS SELECTED ADVISERS holds 47.488 million ADSs, holding about 1%, and BEDFORD RIDGE CAPITAL LP holds 4,581.5 Ten thousand shares of ADS, holding about 1%, which is a new position.

Although institutional investors may have their own opinions, investors such as SoftBank and Uber already hold 45.05% before listing. The media expects that more than half of them will support the delisting, which will not be too difficult.

Knock on the blackboard! Before learning about the delisting of U.S. stocks, the first thing to be clear is that delisting does not mean that the company goes bankrupt, nor does it mean that the stock is completely withdrawn from circulation.

So what does voluntary delisting mean for investors who hold Didi?

What is a voluntary delisting?

According to Zhong Lun Law Firm, in accordance with the US Securities Law, the board of directors of a US listed company can decide to approve a voluntary delisting, and then notify the exchange in writing and submit Form 25 to the SEC within 10 days to complete the delisting. Shares of companies voluntarily delisted in accordance with the above procedures may continue to be traded over-the-counter.

As mentioned above, companies listed in the United States can achieve the purpose of delisting from the exchange through a relatively simple voluntary delisting method, and since voluntary delisting itself does not constitute an acquisition transaction, the economic cost of this delisting method is more controllable , without paying a high acquisition consideration.

However, as a delisting method substantially different from privatization transactions, voluntary delisting has at least the following uncertainties and risks:

1. Although voluntary delisting is not subject to the approval of the SEC or the exchange, the SEC has the right to delay the effective time of the delisting for the purpose of evaluating whether the delisting is in compliance with the U.S. securities laws, and also has the right to decide for the purpose of protecting investors. impose additional conditions on delisting;

2. After the voluntary delisting is completed, the listed company will retain many minority shareholders (including holders of depositary shares or depositary receipts) with different interests because it does not involve the acquisition of shares held by non-public shareholders by the acquirer. Although non-connected minority shareholders do not have the right to directly request the listed company or the controlling shareholder to repurchase/acquire the shares they hold, they will continue to enjoy voting rights and dividend rights (if any) on the corresponding shares;

3. If the minority shareholder believes that the director who approved the voluntary delisting decision violated his fiduciary obligations (Fiduciary Duties), it is possible to file a lawsuit against the director-especially if the listed company decides to delist voluntarily after the board of directors, within a short period of time. The controlling shareholder or other related party of the listed company proposes to acquire the shares held by the minority shareholders at a lower price; and

4. After the voluntary delisting, although the shares held by the shareholders of the listed company can continue to be traded over-the-counter, the liquidity and stock price at this time will be significantly lower than when they are traded on exchanges such as the New York Stock Exchange.

Voluntary delisting shall comply with the applicable laws of the place where the listed company is registered and the U.S. securities laws. However, in the case of voluntary delisting, listed companies do not need to be subject to the many restrictions of Rule 13e-3 like privatization transactions, and generally do not need to be reviewed and approved by the general meeting of shareholders (unless the company’s articles of association provide otherwise), and minority shareholders usually have no objection. right.

Compared with privatized delisting, voluntary delisting is much simpler and takes less time. Voluntary delisting is undoubtedly attractive for listed companies that only want to achieve delisting and do not emphasize cleaning up non-related minority shareholders.

The capital market is changing rapidly, and both entry and exit are the norm in the market. The delisting system is one of the basic systems for the healthy development of the capital market. For the follow-up progress of Didi’s delisting, investors still need to refer to the company’s announcement.


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