Chinese electric car start-up Nio plans to list in Hong Kong on March 10

Chinese electric car start-up Nio plans to list in Hong Kong on March 10

BEIJING — U.S.-listed Chinese electric car firm Nio is ready to supply its shares for buying and selling in Hong Kong on March 10, the start-up introduced Monday.

The transfer comes as regulatory dangers develop in the U.S. and China for Chinese corporations listed in New York, including compliance challenges for companies and traders.

Nevertheless, not like many U.S.-listed Chinese inventory choices in Hong Kong, Nio shouldn’t be elevating new funds or issuing new shares in this itemizing. As a substitute, the corporate is “listing by way of introduction,” which suggests a portion of present shares can be accessible for buying and selling in Hong Kong.

Nio plans to supply these shares for buying and selling below the ticker “9866” beginning subsequent Thursday, in accordance to a filing with the Hong Kong stock exchange.

The Chinese startup stated it additionally utilized for a “way of introduction” itemizing on the primary board of the Singapore Inventory Change. The electric car firm stated it has no plans to make the Singapore and Hong Kong-listed shares exchangeable.

What are the regulatory dangers?

Chinese corporations are more and more at risk of delisting from New York exchanges as Washington wants to reduce U.S. investors’ exposure to businesses that don’t comply with U.S. audit checks. Beijing has resisted allowing such foreign scrutiny of domestic businesses due to potential release of sensitive information.

In the last year, Beijing has also tightened its control of Chinese businesses’ ability to raise capital overseas with new and forthcoming rules ranging from data security to filing requirements. The new rules come in the wake of Chinese ride-hailing app Didi’s U.S. listing in late June, which drew Beijing’s scrutiny on data and national security.

One of the new rules from the increasingly powerful Cyberspace Administration of China — which took effect Feb. 15 — requires “network platform operators” with personal data on more than one million users to undergo a cybersecurity review.

It’s unclear to what extent the rules apply to secondary listings in Hong Kong.

Nio noted the new rule, among many others, in its filing with the Hong Kong exchange.

Based on legal advice from its advisor Han Kun Law Offices, Nio said the company was “of the view that the Cybersecurity Review Measures will not have a material adverse effect on our business, financial condition, operating results and prospects.”

As of Monday, “we have not been informed by any PRC governmental authority of any requirement to file for approval for this Listing,” the company said.

Read more about electric vehicles from CNBC Pro

On data security, the electric car start-up said it has “qualified for Grade III of China’s Administrative Measures for the Graded Protection of Information Security.”

Grade three is “decently high standard” for most commercial sectors, said Ziyang Fan, head of digital trade at the World Economic Forum. He pointed out Beijing has specific regulations on auto driving data, that took effect Oct. 1.

Questions over the security of Nio’s autopilot data system stirred controversy in early August after a deadly crash.

China’s securities fee and cybersecurity regulator, the Singapore change, and Han Kun Legislation Places of work didn’t instantly reply to CNBC’s requests for remark about Nio’s regulatory dangers.

The Hong Kong change stated it doesn’t remark on particular person corporations or circumstances.

Itemizing “by introduction” shouldn’t be a method to keep away from cybersecurity scrutiny, however is a quicker method for a corporation to get listed if it isn’t as targeted on elevating funds, stated Bruce Pang, head of macro and technique analysis at China Renaissance.

“Delisting risk is a real and emerging one. Every Chinese [American Depositary Receipt] should evaluate, hedge and manage it,” Pang stated, referring to U.S.-listed shares of Chinese corporations. ADRs are shares of international corporations buying and selling on a U.S. change.

Didi stated in early December it deliberate to delist from New York and pursue a Hong Kong itemizing, however didn’t specify a date.

Implications for different U.S.-listed Chinese corporations

“We started down a path of converting our shares out of the U.S. ADRs into Hong Kong,” Brendan Ahern, U.S.-based chief funding officer of KraneShares, stated in a cellphone interview in early February.

He expects the agency will speed up the conversions this yr as Chinese corporations more and more discover it tough to meet U.S. audit necessities, in addition to following Chinese legislation. “The path unfortunately seems pretty set,” Ahern stated.

Final summer season, Li Auto and Xpeng, two other U.S.-listed Chinese electric car companies, completed Hong Kong “dual primary listings.” That allows qualified mainland China investors to trade the shares through a program that connects the mainland and Hong Kong markets.

As of Friday’s close, Nio’s U.S.-listed shares had a market value of $33.31 billion. The stock has gained 234.5% from the September 2018 initial public offering price of $6.26 a share.

The stock plunged to a low of $1.19 in late 2019, before a state-led capital injection in early 2020 helped shares soar by more than 1,100% that year. But shares fell by 35% in 2021 and are down by more than 30% so far this year.

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