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Anjani Trivedi

How Wall Street Lost Sight of Didi's Risks

It's impossible to assign responsibility, but bankers and investors should have seen this coming.

Look very, very closely.

Look very, very closely.

Photographer: Yan Cong/Bloomberg

Investors who recently bought into multi-billion-dollar Chinese tech listings in the U.S. may have thought they’d be enjoying the riches of some of the most hotly anticipated IPOs of the year. Instead, they’re staring at headlines churn about Beijing-led regulatory probes and watching their gains vanish. It’s a glaring example that the types of risks once relegated to boilerplate language, deep within company prospectuses, are now front and center. But who bears ultimate responsibility for rooting them out?

Wall Street banks including JPMorgan Chase & Co., Morgan Stanley and Goldman Sachs Group Inc. have become savvier underwriters since the latest version of China’s cybersecurity law took effect last year. For Didi Global Inc., which launched a $4.4 billion initial public offering last week, and recently floated Full Truck Alliance Inc., hailed as China’s Uber for trucks, language about the risks of doing business in China appear as early as page 7 in the IPO prospectus. On page 11, Didi warns: “Claims and/or regulatory actions against us related to anti-monopoly and/or other aspects of our business may result in our being subject to fines, constraints on or modification of our business practice, damage to our reputation, and material adverse impact on our financial condition, results of operations and prospects.” (In years past, those types of warnings didn’t show up until somewhere between page 40 and 60.)