Didi Stock Is Getting Crushed. It’s Starting to Look Like a Buying Opportunity.

Investing in foreign companies always adds risk, particularly in companies located in countries where the government has unchecked power.

Additional risk always shows up in valuation. Investors were conservative when valuing Didi, despite its $70 billion-plus valuation on its first day of trading.

Uber Technologies, Didi’s U.S. analog, trades for roughly 8 times sales. Didi, which is a larger company with almost 500 million active users, traded for about 4 times sales, before Tuesday’s drop.

It’s a big discount. It might even be big enough, if investors decide that things are likely to get better, not worse, from a foreign stock risk perspective.

There are issues of course. The U.S. has required Chinese companies to meet U.S. accounting standards to keep remain listed on U.S. exchanges, while Didi is only the latest one to run afoul of China’s regulators (Alibaba anyone?).

Still, investors need to look ahead. If Didi isn’t cheap enough yet, it’s getting there.

—Al Root

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Tech Companies Feeling Regulatory Heat in China

Chinese regulators raised pressure on U.S.-listed tech companies over the weekend, ordering local app stores to remove the China services of Didi Global, Full Truck Alliance, and Kanzhun from their platforms. The regulators earlier had urged Didi to postpone its listing in New York, The Wall Street Journal reported.

• Didi’s IPO raised $4.4 billion last Wednesday. But worries about the ride-hailing company’s data falling into foreign hands prompted China to block Didi from accepting new users Friday amid a cybersecurity review.
• Didi and more than 30 major Chinese internet companies met with China’s competition and tax regulators and its cybersecurity watchdog in April and had one month to complete a self-inspection to identify and correct potential violations of monopoly, competition, tax, and other laws.
• In Hong Kong, Facebook, Twitter, and Alphabet are threatening to quit the market over the government’s proposed changes to data privacy laws that could make local employees of the three U.S. tech giants liable for malicious user conduct, the Journal reported.
• Hong Kong’s Constitutional and Mainland Affairs Bureau wants to stop doxing, or the practice of putting people’s personal information online to harass them, as what happened during the 2019 protests, the Journal reported.

What’s Next: China has cracked down on internet giants in recent months—extracting a nearly $3 billion antitrust fine from Alibaba in April—on accusations of unfair competition and using customer data to increase profit.

—Liz Moyer

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Oil Prices Shoot Up After OPEC’s Failure to Meet

Prices of Brent crude oil rose to more than $77 a barrel Tuesday, the highest since October 2018, after OPEC canceled a meeting Monday due to a clash between the United Arab Emirates and its traditional ally Saudi Arabia on output curbs. West Texas Intermediate prices rose to $76.40, the highest since 2014.

• According to media reports, the U.A.E. refused to agree to a deal brokered by Saudi Arabia to gradually raise output to tame prices that are up 52% this year.
• OPEC had planned to meet Monday with a group of nonmembers of the organization led by Russia to agree on higher production targets.
• The organization agreed to record output cuts of nearly 10 million barrels per day last year when the pandemic hit, but had increased production by about 4 million barrels per day since then.
• The U.A.E. agreed with other OPEC members to relax production further until the end of the year but objected to the cuts being maintained until the end of 2022 without a revision of its own production threshold, which it deems too low.

What’s Next: Analysts note that the economic rivalry between the Saudis and the Emirates, once close geopolitical allies, is bound to intensify in the coming years, notably as both compete for foreign investments that would help them diversify away from oil.

—Pierre Briançon

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Andy Jassy Takes Over as Amazon CEO From Founder Jeff Bezos

Amazon founder and CEO Jeff Bezos on Monday handed over management of the e-commerce giant to his protégé, Andy Jassy, 53, a 24-year company veteran who built and has run Amazon Web Services, the company’s dominant cloud-computing business, since 2006.

• Amazon is now the world’s largest online retailer and cloud computing company. Its first quarter sales soared 44% and its profits hit $8.1 billion, its highest ever. Wall Street analysts expect the $1.7 trillion company to surpass Walmart to become the largest U.S. company in annual sales next year.
• Bezos, now executive chairman, launched Amazon out of his Seattle garage in 1995, calling it “Earth’s biggest bookstore,” and became a millionaire after its successful IPO in 1997. Now the world’s richest man at 57, he remains Amazon’s largest shareholder.
• Among Jassy’s challenges: the pending $8.5 billion bid for film studio MGM, now being scrutinized by antitrust regulators, including new Federal Trade Commission Chair Lina Khan. Some employees have aired grievances about their working conditions, and in Alabama, warehouse workers voted against unionizing, in a vote that the union has contested.
• “Andy will represent Amazon when Congress or other stakeholders come calling and demanding or requesting hard questions,” said John Rossman, a former Amazon executive and author of The Amazon Way. “Maybe, in some ways, not being the founder will help him be even more effective at those dialogues.”

What’s Next: After Bezos announced plans to travel to space aboard his Blue Origin New Shepard spacecraft on July 20, Richard Branson said he is taking his own crew to space via his Virgin Galactic’s SpaceShipTwo as early as July 11, potentially beating Bezos by nine days.

—Janet H. Cho

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Coronavirus Restrictions Lift But Concerns Remain

The U.K. announced plans for Freedom Day on July 19, when it will lift all coronavirus limits including mask-wearing, social distancing, and the size of gatherings, while France’s health minister warned Sunday about another expected wave of the virus toward the end of July, during peak summer tourist season.

• The U.K. reported 27,334 cases of Covid-19 on Monday, and Prime Minister Boris Johnson said daily cases could climb to 50,000 by July 19. He added that 86% of British adults have received at least one vaccine dose, weakening the link between cases, hospitalizations and deaths.
• Norway on Monday started allowing quarantine-free travel from European countries including France, Croatia and Italy, but postponed its full reopening to July 31 over concerns the Delta variant could cause a fourth wave of infections.
• Some European Union countries have started accepting a digital health certificate allowing vaccinated people to travel to most countries within the bloc, but some countries have imposed additional restrictions for visitors from certain nations. The certificates are only for EU citizens or residents, with no plans for a U.S. equivalent.
• The U.S. Centers for Disease Control and Prevention ranks most of Europe as Level 3, the second riskiest on its warning scale, and discourages unvaccinated people from nonessential travel there. Belgium, Sweden and Croatia are among the countries still ranked as Level 4, the riskiest.

What’s Next: As of July 1, Athens, Paris, and Lisbon were the most-booked European destinations from New York City on Hopper, an app that collects airfare price quotes. Athens has seen an increase because it began welcoming Americans before the general EU opening.

—Janet H. Cho

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U.S. Private Equity’s Pounce on British Companies Raises Alarm in London

The record number of deals by U.S. buyout groups to take over British-based companies in the first half of the year is provoking a backlash from some politicians and finance professionals, who are asking regulators or the government to increase their control of the new owners.

• Buyout groups have announced bids to take control of 366 U.K. companies so far this year, the highest since records started being collected in 1984, according to Refinitiv data quoted by Reuters.
• Apollo Global Management this week joined the fray in the bidding war for the control of U.K. retailer Morrisons, and KKR has announced plans to beef up its London presence to pursue British companies.
• Several traditional fund managers have warned that there is “a raid” on U.K. companies due to their current low valuation after the pandemic and the serious recession the British economy went through last year.
• The head of the House of Commons’ business committee recently wrote to the U.K. competition watchdog to ask for a clarification about its powers to intervene after a private equity deal “when new owners act irresponsibly.”

What’s Next: U.K. Chancellor of the Exchequer Rishi Sunak has announced a sweeping plan to overhaul the U.K.’s financial rules. On private equity regulations he has to balance the government’s aim to promote “global Britain” with its stated intention to closely monitor who owns what in British business.

—Pierre Briançon

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—Newsletter edited by Stacy Ozol, Liz Moyer, Matt Bemer, Ben Levisohn