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

Nio Founder and CEO William Li poses outside of the New York Inventory Trade to celebrate his company’s IPO.

Image: NYSE

BEIJING — U.S.-mentioned Chinese electric powered car corporation Nio is set to provide its shares for investing in Hong Kong on March 10, the start out-up introduced Monday.

The transfer arrives as regulatory pitfalls expand in the U.S. and China for Chinese businesses shown in New York, adding compliance challenges for enterprises and buyers.

Having said that, not like many U.S.-shown Chinese inventory offerings in Hong Kong, Nio is not raising new money or issuing new shares in this listing. Rather, the corporation is “listing by way of introduction,” which signifies a portion of present shares will be offered for buying and selling in Hong Kong.

Nio designs to offer people shares for trading underneath the ticker “9866” commencing next Thursday, in accordance to a submitting with the Hong Kong inventory trade.

The Chinese startup mentioned it also used for a “way of introduction” listing on the main board of the Singapore Inventory Trade. The electric powered car firm explained it has no options to make the Singapore and Hong Kong-detailed shares exchangeable.

What are the regulatory threats?

One particular of the new rules from the progressively potent Cyberspace Administration of China — which took result Feb. 15 — demands “community platform operators” with particular information on much more than a single million buyers to endure a cybersecurity critique.

It truly is unclear to what extent the guidelines use to secondary listings in Hong Kong.

Nio noted the new rule, among many other individuals, in its submitting with the Hong Kong exchange.

Based mostly on legal guidance from its advisor Han Kun Law Places of work, Nio reported the firm was “of the view that the Cybersecurity Overview Steps will not have a product adverse impact on our enterprise, money affliction, running final results and prospective customers.”

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.

Browse much more about electrical cars from CNBC Professional

On details safety, the electrical car get started-up stated it has “competent for Grade III of China’s Administrative Steps for the Graded Safety of Information Safety.”

Grade 3 is “decently superior typical” for most business sectors, explained Ziyang Lover, head of electronic trade at the Planet Financial Discussion board. He pointed out Beijing has distinct regulations on auto driving information, that took effect Oct. 1.

Inquiries more than the stability of Nio’s autopilot info technique stirred controversy in early August following a fatal crash.

China’s cybersecurity regulator did not answer to CNBC’s request for comment about Nio’s regulatory hazards.

The China Securities Regulatory Fee said in a statement to CNBC late Tuesday that forthcoming draft regulations would demand Chinese businesses to notify the commission of overseas listings. But considering the fact that all those regulations have however to acquire impact, these communication is not essential but encouraged, the fee reported, noting the procedures will not be applied retroactively.

The Hong Kong and Singapore exchanges declined to remark on particular person organizations or circumstances.

Listing “by introduction” is not a way to avoid cybersecurity scrutiny, but is a faster way for a company to get listed if it is not as centered on increasing funds, stated Bruce Pang, head of macro and technique investigation at China Renaissance.

“Delisting risk is a actual and rising 1. Just about every Chinese [American Depositary Receipt] really should consider, hedge and handle it,” Pang reported, referring to U.S.-outlined shares of Chinese organizations. ADRs are stocks of international firms trading on a U.S. exchange.

Didi said in early December it prepared to delist from New York and pursue a Hong Kong listing, but did not specify a date.

Implications for other U.S.-shown Chinese providers

“We started down a route of changing our shares out of the U.S. ADRs into Hong Kong,” Brendan Ahern, U.S.-centered chief expenditure officer of KraneShares, claimed in a mobile phone interview in early February.

He expects the organization will accelerate the conversions this 12 months as Chinese corporations more and more come across it tough to meet up with U.S. audit necessities, in addition to subsequent Chinese regulation. “The route unfortunately looks quite set,” Ahern said.

Final summer season, Li Auto and Xpeng, two other U.S.-listed Chinese electric powered auto organizations, completed Hong Kong “dual main listings.” That allows capable mainland China traders to trade the shares as a result of a plan that connects the mainland and Hong Kong marketplaces.

As of Friday’s close, Nio’s U.S.-listed shares had a market place price of $33.31 billion. The inventory has gained 234.5{f8f9f7e6fa72495c30ab254213729fbbad6cff923a9c63d260c5c902274d4d9d} from the September 2018 preliminary community offering selling price of $6.26 a share.

The inventory plunged to a low of $1.19 in late 2019, in advance of a condition-led money injection in early 2020 served shares soar by additional than 1,100{f8f9f7e6fa72495c30ab254213729fbbad6cff923a9c63d260c5c902274d4d9d} that calendar year. But shares fell by 35{f8f9f7e6fa72495c30ab254213729fbbad6cff923a9c63d260c5c902274d4d9d} in 2021 and are down by extra than 30{f8f9f7e6fa72495c30ab254213729fbbad6cff923a9c63d260c5c902274d4d9d} so significantly this calendar year.