Chinese electric car startup Nio plans to list in Hong Kong on March 10

Nio founder and CEO William Li poses in front of the New York Stock Exchange to celebrate his company’s IPO.

Photo: NYSE

BEIJING — U.S.-listed Chinese electric car company Nio is expected to offer its shares for trading in Hong Kong on March 10, the startup said Monday.

The move comes as regulatory risks increase in the United States and China for Chinese companies listed in New York, adding compliance challenges for companies and investors.

However, unlike many US-listed Chinese stock offerings in Hong Kong, Nio does not raise new funds or issue new shares in this list. Instead, the company is “IPO-listed,” meaning some of the existing shares will be available for trading in Hong Kong.

Nio plans to offer the shares for trading under the symbol “9866” from next Thursday, according to a filing with the Hong Kong Stock Exchange.

The Chinese startup said it had also applied for a “listing track” on the main board of the Singapore Stock Exchange. The electric vehicle company said it has no plans to make shares listed in Singapore and Hong Kong tradable.

What are the regulatory risks?

Chinese companies are increasingly at risk of being delisted from New York stock exchanges as Washington wants to reduce US investors’ exposure to companies that fail to comply with US audit controls. Beijing has resisted allowing such foreign scrutiny of domestic companies due to the potential disclosure of sensitive information.

Over the past year, Beijing has also tightened its control over the ability of Chinese companies to raise capital overseas with new rules coming from data security to filing requirements. The new rules follow the U.S. listing of Chinese app Didi in late June, which drew Beijing’s attention to data and national security.

One of China’s increasingly powerful Cyberspace Administration’s new rules – which came into force on February 15 – requires “network platform operators” with personal data on more than one million users undergo a cybersecurity review.

It is 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 stock exchange.

Based on legal advice from his adviser Han Kun Law Offices, Nio said the company is “of the opinion that the cybersecurity review measures will not have a material adverse effect on our business, financial condition , our results of operations and our outlook”.

On Monday, “we have not been informed by any government authority in the PRC of the requirement to file an application for approval for this listing,” the company said.

Learn more about electric vehicles from CNBC Pro

On data security, the electric car startup said it was “qualified for Level III of China’s Administrative Measures for Graduated Information Security Protection.”

Year three is “a decently high standard” for most business sectors, said Ziyang Fan, head of digital trade at the World Economic Forum. He pointed out that Beijing has specific regulations on car driving data, which came into force on October 1.

Questions about the safety of Nio’s autopilot data system sparked controversy in early August after a fatal crash.

China’s securities commission and cybersecurity regulator, the Singapore Stock Exchange and Han Kun’s law firms did not immediately respond to CNBC’s requests for comment on Nio’s regulatory risks.

The Hong Kong stock exchange said it does not comment on companies or individual cases.

Listing “by introduction” isn’t a way to avoid cybersecurity scrutiny, but it’s a faster way for a company to get listed if it’s not as focused on gathering funds, said Bruce Pang, head of macro research and strategy at China Renaissance.

“The risk of radiation is real and emerging. Every Chinese [American Depositary Receipt] should assess it, hedge it and manage it,” Pang said, referring to U.S.-listed shares of Chinese companies. ADRs are shares of foreign companies traded on a US stock exchange.

Didi said in early December that he planned to delist in New York and pursue a listing in Hong Kong, but did not specify a date.

Implications for other Chinese companies listed in the United States

“We have started converting our shares from US ADRs to Hong Kong,” Brendan Ahern, KraneShares’ US-based chief investment officer, said in a phone interview in early February.

He expects the company to accelerate conversions this year as Chinese companies find it increasingly difficult to meet US audit requirements, in addition to complying with Chinese law. “The path unfortunately seems quite clear,” Ahern said.

Last summer, Li Auto and Xpeng, two other Chinese electric car companies listed in the United States, completed Hong Kong’s “dual primary listing”. This allows qualified mainland Chinese investors to trade the shares through a program that links 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 IPO price of $6.26 per share.

The stock plunged to a low of $1.19 at the end of 2019, before a state-led capital injection in early 2020 sent shares soaring more than 1,100% that year. . But stocks have fallen 35% in 2021 and are down more than 30% so far this year.

About Darnell Yu

Check Also

Trade Matters – Lowenstein Sandler’s Bulletin on Global Trade and National Security – November 3, 2022 | Lowenstein Sandler LLP

1. New controls targeting China’s semiconductor and supercomputer sectors The U.S. Department of Commerce’s Bureau …