Didi Global Inc., the Chinese company that operates the ridesharing service Didi Chuxing, is in hot water with the Cyberspace Administration of China (CAC) as well as with investors. The company stands accused of illegally collecting the personal data of its users. It is also under investigation for securities law violations. A class action lawsuit has already been filed against the company on behalf of shareholders who suffered losses.
A fast rise and a faster fall
Last week, the CAC revealed that it was conducting a review of Didi’s cybersecurity activity. The administration, which regulates the cybersecurity of Chinese companies in a variety of industries, alleges that Didi crossed the line into illegal activity by gathering its users’ private data. Legal and financial professionals have begun looking into potential securities law violations that may have harmed investors.
It is a major blow to a company that had been flying high just days before the CAC’s announcement. Didi Global Inc. launched its initial public offering three days earlier on June 30. Its shares dipped by 25% to close at $11.97 as of July 6. Apple has removed the ridesharing app from its app store and Didi cannot accept new clients until the investigation closes.
The first wave of lawsuits
Predictably, shareholders are furious. This week, a class action lawsuit was filed against Didi on behalf of individuals and other entities that suffered losses due to potential securities violations. It may be the first of many that could roll in as authorities reveal more of Didi’s alleged cybersecurity and securities law offenses.
Shareholders in Didi Global Inc. who have suffered financial losses have the option of filing plaintiff actions as individuals or as a group of individuals. The latter type of lawsuit, known as a class action, is a common option for wronged investors who seek to recover compensation for their damages. The strength of multiple plaintiffs banding together may prove crucial in taking on such a powerful tech company.