Nio Founder and CEO William Li poses outdoors of the New York Inventory Change to have fun his firm’s IPO.
Picture: NYSE
BEIJING — U.S.-listed Chinese language electrical automobile 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 within the U.S. and China for Chinese language firms listed in New York, including compliance challenges for companies and traders.
Nonetheless, not like many U.S.-listed Chinese language inventory choices in Hong Kong, Nio isn’t elevating new funds or issuing new shares on this itemizing. As an alternative, the corporate is “itemizing by the use of introduction,” which implies a portion of present shares shall be out there for buying and selling in Hong Kong.
Nio plans to supply these shares for buying and selling underneath the ticker “9866” beginning subsequent Thursday, in keeping with a submitting with the Hong Kong inventory alternate.
The Chinese language startup stated it additionally utilized for a “method of introduction” itemizing on the principle board of the Singapore Inventory Change. The electrical car firm stated it has no plans to make the Singapore and Hong Kong-listed shares exchangeable.
What are the regulatory dangers?
Chinese language firms are more and more at threat of delisting from New York exchanges as Washington needs to cut back U.S. traders’ publicity to companies that do not adjust to U.S. audit checks. Beijing has resisted permitting such overseas scrutiny of home companies as a consequence of potential launch of delicate data.
Within the final yr, Beijing has additionally tightened its management of Chinese language companies’ means to lift capital abroad with new and forthcoming guidelines starting from information safety to submitting necessities. The brand new guidelines come within the wake of Chinese language ride-hailing app Didi’s U.S. itemizing in late June, which drew Beijing’s scrutiny on information and nationwide safety.
One of many new guidelines from the more and more highly effective Our on-line world Administration of China — which took impact Feb. 15 — requires “community platform operators” with private information on multiple million customers to bear a cybersecurity assessment.
It is unclear to what extent the principles apply to secondary listings in Hong Kong.
Nio famous the brand new rule, amongst many others, in its submitting with the Hong Kong alternate.
Based mostly on authorized recommendation from its advisor Han Kun Legislation Workplaces, Nio stated the corporate was “of the view that the Cybersecurity Evaluate Measures won’t have a fabric antagonistic impact on our enterprise, monetary situation, working outcomes and prospects.”
As of Monday, “now we have not been knowledgeable by any PRC governmental authority of any requirement to file for approval for this Itemizing,” the corporate stated.
On information safety, the electrical automobile start-up stated it has “certified for Grade III of China’s Administrative Measures for the Graded Safety of Data Safety.”
Grade three is “decently excessive commonplace” for many industrial sectors, stated Ziyang Fan, head of digital commerce on the World Financial Discussion board. He identified Beijing has particular rules on auto driving information, that took impact Oct. 1.
Questions over the safety of Nio’s autopilot information system stirred controversy in early August after a deadly crash.
China’s securities fee and cybersecurity regulator, the Singapore alternate, and Han Kun Legislation Workplaces didn’t instantly reply to CNBC’s requests for remark about Nio’s regulatory dangers.
The Hong Kong alternate stated it doesn’t touch upon particular person firms or circumstances.
Itemizing “by introduction” isn’t a strategy to keep away from cybersecurity scrutiny, however is a sooner method for an organization to get listed if it’s not as centered on elevating funds, stated Bruce Pang, head of macro and technique analysis at China Renaissance.
“Delisting threat is an actual and rising one. Each Chinese language [American Depositary Receipt] ought to consider, hedge and handle it,” Pang stated, referring to U.S.-listed shares of Chinese language firms. ADRs are shares of overseas firms buying and selling on a U.S. alternate.
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 language firms
“We began down a path of changing 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 language firms more and more discover it troublesome to fulfill U.S. audit necessities, along with following Chinese language legislation. “The trail sadly appears fairly set,” Ahern stated.
Final summer time, Li Auto and Xpeng, two different U.S.-listed Chinese language electrical automobile firms, accomplished Hong Kong “twin major listings.” That permits certified mainland China traders to commerce the shares via a program that connects the mainland and Hong Kong markets.
As of Friday’s shut, Nio’s U.S.-listed shares had a market worth of $33.31 billion. The inventory has gained 234.5% from the September 2018 preliminary public providing value of $6.26 a share.
The inventory plunged to a low of $1.19 in late 2019, earlier than a state-led capital injection in early 2020 helped shares soar by greater than 1,100% that yr. However shares fell by 35% in 2021 and are down by greater than 30% to date this yr.
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