Nio Founder and CEO William Li poses outdoors of the New York Stock Exchange to have fun his firm’s IPO.
Photo: NYSE
BEIJING — U.S.-listed Chinese electrical automotive 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 corporations listed in New York, including compliance challenges for companies and traders.
However, in contrast to many U.S.-listed Chinese inventory choices in Hong Kong, Nio shouldn’t be elevating new funds or issuing new shares on this itemizing. Instead, the corporate is “itemizing by the use of introduction,” which suggests a portion of present shares will likely be out there for buying and selling in Hong Kong.
Nio plans to supply these shares for buying and selling beneath the ticker “9866” beginning subsequent Thursday, in line with a submitting with the Hong Kong inventory trade.
The Chinese startup mentioned it additionally utilized for a “manner of introduction” itemizing on the principle board of the Singapore Stock Exchange. The electrical car firm mentioned 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 prone to 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 resulting from potential launch of delicate data.
In the final yr, Beijing has additionally tightened its management of Chinese companies’ skill to boost capital abroad with new and forthcoming guidelines starting from knowledge safety to submitting necessities. The new guidelines come within the wake of Chinese ride-hailing app Didi’s U.S. itemizing in late June, which drew Beijing’s scrutiny on knowledge and nationwide safety.
One of the brand new guidelines from the more and more highly effective Cyberspace Administration of China — which took impact Feb. 15 — requires “community platform operators” with private knowledge on multiple million customers to bear a cybersecurity evaluate.
It’s 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 trade.
Based on authorized recommendation from its advisor Han Kun Law Offices, Nio mentioned the corporate was “of the view that the Cybersecurity Review Measures is not going to have a fabric adversarial 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 Listing,” the corporate mentioned.
Read extra about electrical automobiles from CNBC Pro
On knowledge safety, the electrical automotive start-up mentioned it has “certified for Grade III of China’s Administrative Measures for the Graded Protection of Information Security.”
Grade three is “decently excessive commonplace” for many industrial sectors, mentioned Ziyang Fan, head of digital commerce on the World Economic Forum. He identified Beijing has particular laws on auto driving knowledge, that took impact Oct. 1.
Questions over the safety of Nio’s autopilot knowledge system stirred controversy in early August after a deadly crash.
China’s securities fee and cybersecurity regulator, the Singapore trade, and Han Kun Law Offices didn’t instantly reply to CNBC’s requests for remark about Nio’s regulatory dangers.
The Hong Kong trade mentioned it doesn’t touch upon particular person corporations or instances.
Listing “by introduction” shouldn’t be a technique to keep away from cybersecurity scrutiny, however is a sooner manner for a corporation to get listed if it isn’t as centered on elevating funds, mentioned Bruce Pang, head of macro and technique analysis at China Renaissance.
“Delisting danger is an actual and rising one. Every Chinese [American Depositary Receipt] ought to consider, hedge and handle it,” Pang mentioned, referring to U.S.-listed shares of Chinese corporations. ADRs are shares of overseas corporations buying and selling on a U.S. trade.
Didi mentioned 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 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, mentioned in a telephone interview in early February.
He expects the agency will speed up the conversions this yr as Chinese corporations more and more discover it troublesome to satisfy U.S. audit necessities, along with following Chinese regulation. “The path sadly appears fairly set,” Ahern mentioned.
Last summer time, Li Auto and Xpeng, two different U.S.-listed Chinese electrical automotive corporations, accomplished Hong Kong “twin main listings.” That permits certified mainland China traders to commerce the shares by way of 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 worth 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. But shares fell by 35% in 2021 and are down by greater than 30% to this point this yr.