In September, I wrote an article on Didi Global (NYSE: DIDI), giving investors some scenarios that could happen. Well, nearly five months later, DIDI stock is still moving in the wrong direction. In fact, things got worse for the ride-sharing company.

At the time, DIDI shares were trading around $8. That said, DIDI shares have lost another 44% of their value since then.

Chinese regulators continue to crack down on the ride-sharing industry as investors steer clear. To make matters worse, a joint notice from eight departments, including the Transportation Ministry, outlines China’s plans to step up surveillance.

Additionally, Didi is now considering delisting from the New York Stock Exchange (NYSE) while converting shareholders to a new listing on the Hong Kong Stock Exchange (HKEX).

Below I will show you how this can affect DIDI stock and what to expect next.

China Building Regulations

I don’t see many situations where increased regulation is good for a business. But, in Didi’s case, that may be what the company needs.

In September, I warned investors of potential data issues after Chinese regulators suggested DIDI stock would delay its IPO. Despite the warnings, the company went ahead and listed anyway. We are now seeing the consequences with his plans to delist from the NYSE.

With that in mind, China is announcing plans to tighten regulations as the industry grows. According to the notice, several activities will be deemed illegal. These include:

• Internet and Data Security Breach
• Infringing Personal Information
• Damage to the public interest
• Disruption of social order
• Impact on social security
• Violation of labor rights
• Do not pay taxes

Additionally, if a company fails to comply, it could face severe penalties. For example, they may be ordered out of business or face an internet ban.

The new rules will undoubtedly make it harder for Didi Global to do business. Still, it could be good for a company with huge potential that can’t seem to muster it.

How it affects the Didi share price

After the company’s announcement to delist, DIDI stock fell to an all-time low of $3.33. For a company already under heavy scrutiny, the last thing investors want to hear is more regulation.

DIDI has already removed 25 apps in China due to data issues. With that in mind, without an online platform, the company warns it could hurt business.

Although China has released plans to further regulate the industry, DIDI stock has risen 8% this week. One explanation for this is that investors are seeing value as stocks are down more than 80% from their all-time high (ATH) of $18.

Another reason could be Bernstein analyst Cherry Leung starting to hedge DIDI stock with an outperform rating and $6.20 PT. Leung cited the “regulatory storm” is about to end and Didi Global working with the Chinese government as a positive.

At the same time, China has shown us time and time again that it cares less about corporate values. Investors will therefore need to continue to be cautious here.

If the department finds Didi Global in violation of any of these, it could be prejudicial.

Is there hope for investors?

Now, many investors are wondering, “is there any hope for DIDI shares?” As I noted, some investors are already finding value in the battered rideshare company.

Despite rumors last week about the Chinese tech giant Tencent (OTC: TCEHY) buying DIDI shares, the company has since denied this information. Instead, the company says it already owned the shares.

No matter how you look at it, investing in DIDI shares is a risky situation. The new regulations could further reduce the company’s ability to generate profits.

Not only that, but investors are looking at this from an outside perspective. In a risk-free market like the one we find ourselves in now, investors offload risky assets like growth stocks to protect their accounts.

Is the worst over for Didi Global? That’s what investors are hoping for. If the “regulatory storm” is truly behind them, this could be a buying opportunity for a ridesharing leader. But again, that’s a big “if”. And as I showed in my last article on DIDI actions, having these “if”s doesn’t always work.

Moreover, with the competition now entering the Chinese market, will Didi Global be able to maintain its lead? Data issues are a real threat. If the company is found to have breached the new regulations, it could be the final straw for investors.

What to do with Didi stock price

In a crazy turn of events, the “Uber of China”, Didi Global is falling out of favor with investors. Despite once being the world’s largest ride-hailing company, DIDI stock has fallen more than 72% from its IPO price.

Its current price is around $4.45 as the company navigates in a new direction. With hopes that the worst is behind the record-sharing company, the stock is bidding from its low of $3.33.

Meanwhile, several Chinese companies are stepping up as the country’s policymakers suggest boosting the economy. If this holds, it would be a stark contrast to the United States as it battles inflation.

Even though China is keeping its economic policy open this year to promote growth, markets remain challenging.

With that in mind, China’s brutal regulation and tech crackdown is making investors wary of buying. Consequently, the SPDR S&P China ETFs (NYSE: GXC) is down 32% over the past year.

Industries that collect personal data like ridesharing are particularly vulnerable to the new laws. This makes investing in companies like Didi Global particularly risky. But, if you are looking for a high-risk, high-reward opportunity, DIDI stocks may be for you.

Didi Global is still one of the leading ridesharing companies despite losing part of its business. The global ridesharing market is one of the fastest growing markets and is expected to reach $61.4 billion by 2026.

More importantly, China and Europe dominate the market where DIDI shares have a larger presence. If there was a time to change things, it would be now. That said, perhaps the new regulations can help Didi Global get back on track.

Pete Johnson is an experienced financial writer and content creator specializing in equity and derivatives research. He has over ten years of personal investment experience. Digging through Forms 10-K and finding hidden treasures is his favorite pastime. When Pete isn’t doing stock research or writing, you can find him enjoying the outdoors or exercising.