DiDi Delisting’s Effect On ETFs

Beijing kicked off a summer of economic tamp-downs across entire industries in July after China’s top ride-hailing firm DiDi Global listed its shares on the NYSE.

Now that catalyst event is being rolled back.

DiDi announced Friday morning that it’s delisting from the NYSE and plans to re-list on the Hong Kong Stock Exchange, bringing an end to the company’s short life as a U.S.-listed stock. It’s not clear how long it’ll take for DiDi to delist, or what exactly that means for ETFs that own the company.

Who Holds DiDi?

There are 58 U.S.-listed ETFs that hold DiDi stock, according to Bloomberg data. These funds are a blend of focus on China, emerging markets and travel technology.

However, the vast majority hold less than 0.1% of their weight in the company. The table below shows the top 10 ETFs based on weight as of Dec. 3.

Those 10 funds have just shy of $55 million worth of assets in DiDi shares.

What Happens Now?

It’s not exactly clear when DiDi plans to re-list in Hong Kong, as the firm did not lay out a timeline for such a move in its filings. But Brendan Ahern, chief investment officer for KraneShares, said it could be forced to delist within the next three years under the U.S. Holding Foreign Companies Accountable Act.

The Hong Kong Stock Exchange has also waived its listing rules for U.S.-listed companies domiciled in China, he said, so a changeover could come sooner. He expects institutional investors and fund managers to convert their American depositary receipts into Hong Kong-class shares in that event.

KraneShares has a suite of Chinese-focused ETFs, but none hold DiDi.

The swap is straightforward for actively managed funds, but passive funds will need to rely on their index provider’s guidelines to determine their next steps based on the listing being moved. For example, FTSE Russell’s methodology allows for a company to be removed from indices if it is no longer listed on any eligible exchange, but MSCI’s corporate event methodology doesn’t necessarily disqualify a company if it’s in the midst of listing elsewhere.

Contact Dan Mika at [email protected], and follow him on Twitter