Nio Founder and CEO William Li poses outdoors of the New York Inventory Trade to rejoice his firm’s IPO.
Photograph: NYSE
BEIJING — U.S.-listed Chinese language electrical automotive firm Nio is about 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 corporations listed in New York, including compliance challenges for companies and buyers.
Nevertheless, in contrast to many U.S.-listed Chinese language inventory choices in Hong Kong, Nio shouldn’t be elevating new funds or issuing new shares on this itemizing. As a substitute, the corporate is “itemizing by the use of introduction,” which implies a portion of current shares might 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 with a filing with the Hong Kong stock exchange.
The Chinese language startup mentioned it additionally utilized for a “approach of introduction” itemizing on the principle board of the Singapore Inventory Trade. 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 language corporations are more and more at risk of delisting from New York exchanges as Washington needs to scale back U.S. buyers’ publicity to companies that do not adjust to U.S. audit checks. Beijing has resisted permitting such international scrutiny of home companies because of potential launch of delicate data.
Within the final yr, Beijing has additionally tightened its management of Chinese language companies’ capability 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 data and national security.
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 a couple of million customers to bear a cybersecurity assessment.
It’s unclear to what extent the rules apply to secondary listings in Hong Kong.
Nio famous the brand new rule, amongst many others, in its submitting with the Hong Kong alternate.
Primarily based on authorized recommendation from its advisor Han Kun Regulation Places of work, Nio mentioned the corporate was “of the view that the Cybersecurity Evaluate Measures is not going to have a cloth hostile impact on our enterprise, monetary situation, working outcomes and prospects.”
As of Monday, “we now have not been knowledgeable by any PRC governmental authority of any requirement to file for approval for this Itemizing,” the corporate mentioned.
On information safety, the electrical automotive start-up mentioned 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, mentioned Ziyang Fan, head of digital commerce on the World Financial Discussion board. He identified Beijing has particular laws on auto driving information, that took impact 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 alternate, and Han Kun Regulation Places of work didn’t instantly reply to CNBC’s requests for remark about Nio’s regulatory dangers.
The Hong Kong alternate mentioned it doesn’t touch upon particular person corporations or circumstances.
Itemizing “by introduction” shouldn’t be a method to keep away from cybersecurity scrutiny, however is a sooner approach for a corporation to get listed if it’s not as targeted on elevating funds, mentioned Bruce Pang, head of macro and technique analysis at China Renaissance.
“Delisting danger is an actual and rising one. Each Chinese language [American Depositary Receipt] ought to consider, hedge and handle it,” Pang mentioned, referring to U.S.-listed shares of Chinese language corporations. ADRs are shares of international corporations buying and selling on a U.S. alternate.
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 language 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 cellphone interview in early February.
He expects the agency will speed up the conversions this yr as Chinese language corporations more and more discover it tough to satisfy U.S. audit necessities, along with following Chinese language regulation. “The trail sadly appears fairly set,” Ahern mentioned.
Final summer season, Li Auto and Xpeng, two different U.S.-listed Chinese language electrical automotive corporations, accomplished Hong Kong “twin major listings.” That enables certified mainland China buyers to commerce the shares by 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. However shares fell by 35% in 2021 and are down by greater than 30% to this point this yr.
