Let Didi (DIDI) be the last straw. For years now I have been railing against Chinese IPOs, saying that you should steer clear of them at all cost.
This Didi fiasco makes that clear for certain. There is no way that you can ever invest in a Chinese IPO no matter how good if it can be trashed by the Chinese government just a few days after coming public.
I figured that they would have cleared this one with the government, The big ones have historically had a decent record and with only a little more than a third of the country registered with the app you had a real chance for fabulous numbers for years to come.
Nope. Now it is a much slower growing market than we thought and the new price reflects that.
The viciousness of what happened here is extraordinary. We now know that the company had a good inkling that the government was about to hammer it. But it either communicated that to the investors or didn't. We can't know for sure. We also do not know if the bankers knew. We probably will have no idea if that's the case unless the SEC decides to investigate and tells all companies and American investors to retain all documents and get ready for a nightmare of an inquiry. Should be full-stop on the Chinese deals.
What can I say about the Peoples Republic of China? If the government wanted our investors to lose the maximum it would do exactly as it did.
As it is Chinese deals are no picnic. This year 22 out of 35 deals are below their offering price, mind you in a pretty darned good year. Fifteen of 35 deals are down 20%+ from their offering price. Sure there are some good deals but that's a pathetic record.
Some of the blame goes to greedy as well as unsophisticated or less-than-bright investors. The greedy are the investors who want to cash out, including lots of American companies. The less gamblers at the black jack table betting on Double Zero.
What I don't understand is why our government doesn't demand the same level of disclosure that insist our companies give. Why should we let the Chinese off the hook? After this travesty they should do what I have been advocating for years: block them from bringing public companies until they trade fairly, stop having these joke joint ventures that steal our intellectual property and play fair for once.
I know that our companies seem to be hanging by a thread. The stock of Nike (NKE) has been soaring because they have been playing ball with the Chinese. I still wonder what would have happened if the CEO, John Donahoe, had been asked about religious freedom in China. Could the stock have been down as much as it has been up?
We have been patsies for too long. I understand that we thought commerce would open up China to eventual democracy.
It did the opposite.
Time to recognize that and what happened with Didi and simply declare no more offerings, period.