By Julie Zhu and Kane Wu

HONG KONG (Reuters) – Ride-hailing giant Didi Global said it will delist from the New York stock exchange just five months after its debut and pursue a listing in Hong Kong – having raised the ire of Chinese regulators for ignoring a request to put its U.S. IPO on hold.

Didi pushed ahead with its $4.4 billion U.S. initial public offering despite being asked to suspend it while a review of the company’s data practices was conducted.

The powerful Cyberspace Administration of China (CAC) then quickly ordered app stores to remove 25 of Didi’s mobile apps and told the company to stop registering new users, citing national security and the public interest. Didi remains under investigation.

“Following careful research, the company will immediately start delisting on the New York stock exchange and start preparations for listing in Hong Kong,” Didi said on its Twitter-like Weibo account.

The company said it would ensure that its New York-listed shares would be convertible into “freely tradable shares” on another internationally recognised stock exchange.

It did not explain its reasons for the plan but said in a separate statement that it would organise a shareholder vote at an appropriate time.

The upending of Didi’s New York listing – likely to be a difficult and messy process – illustrates both the huge clout that Chinese regulators possess and their emboldened approach to wielding it. Billionaire Jack Ma also ran afoul of Chinese authorities, leading to the dramatic scuppering of a mega-IPO for Ant Group last year.

The move will also likely further discourage Chinese firms from listing in the United States and could prompt some to reconsider their status as U.S. publicly traded companies.

“Chinese ADRs face increasing regulatory challenges from both U.S. and Chinese authorities. For most companies, it will be like walking on eggshells trying to please both sides. Delisting will only make things simpler,” said Wang Qi, CEO at fund manager at MegaTrust Investment (HK).

Sources have told Reuters that Chinese regulators pressed Didi’s top executives to devise a plan to delist https://www.reuters.com/world/china/china-asks-didi-delist-us-security-fears-bloomberg-news-2021-11-26 from the New York Stock Exchange due to concerns about data security.

Didi is planning to proceed with a Hong Kong listing soon before embarking on a delisting from New York, sources with knowledge of the matter told Reuters.

It aims to complete a dual primary listing in Hong Kong in the next three months, and under pressure from Beijing delist from New York by June 2022, said one of the sources.

The sources were not authorised to talk to media and declined to be identified. Didi did not immediately respond to Reuters requests for comment.

Listing in Hong Kong might, however, prove complicated.

One key challenge is whether the bourse would willing to approve it given that only 20%-30% of the company’s core ride-hailing business in China is fully compliant with regulations requiring three permits, a source with knowledge of the matter said on Friday.

The source, who was not authorised to talk to media and declined to be identified, added that this had been the main obstacle to the company conducting an IPO in Hong Kong earlier.

Didi did not immediately respond to Reuters requests for comment.

Sources have also told Reuters that Didi is preparing to relaunch its apps https://www.reuters.com/technology/exclusive-didi-prepares-relaunch-apps-china-anticipates-probe-will-end-soon-2021-11-11 in China by the end of the year in anticipation that Beijing’s cybersecurity investigation into the company would be wrapped up by then.

The CAC did not immediately respond to a request for comment on Didi’s plans to delist from New York.

Didi made its New York debut on June 30 at $14 per American Depositary Share, which gave the company a valuation of $67.5 billion on a non-diluted basis. Those shares have since slid 44% until Thursday’s close, valuing it at $37.6 billion.

Shares in Didi investor SoftBank Group Corp fell 2% after the Didi announcement, also hurt by Southeast Asian ridehailing giant Grab’s slump in its Nasdaq debut.

SoftBank’s Vision Fund owns 21.5% of Didi, followed by Uber Technologies Inc with 12.8%, according to a filing in June by Didi.

(Reporting by Julie Zhu; Additional reporting by Brenda Goh, Kane Wu, Zoey Zhang, Cheng Leng, Alun John and Sayantani Ghosh; Editing by Sumeet Chatterjee and Edwina Gibbs)