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

Nio Founder and CEO William Li poses exterior of the New York Stock Exchange to rejoice his firm’s IPO.

Picture: NYSE

BEIJING — U.S.-stated Chinese electric powered car enterprise Nio is established to offer its shares for trading in Hong Kong on March 10, the start out-up announced Monday.

The go arrives as regulatory dangers mature in the U.S. and China for Chinese companies shown in New York, introducing compliance worries for organizations and traders.

On the other hand, unlike a lot of U.S.-shown Chinese inventory choices in Hong Kong, Nio is not raising new cash or issuing new shares in this listing. As a substitute, the organization is “listing by way of introduction,” which indicates a part of current shares will be out there for trading in Hong Kong.

Nio ideas to offer you all those shares for investing underneath the ticker “9866” beginning next Thursday, according to a filing with the Hong Kong inventory trade.

The Chinese startup explained it also applied for a “way of introduction” listing on the key board of the Singapore Inventory Trade. The electric powered auto company mentioned it has no programs to make the Singapore and Hong Kong-outlined shares exchangeable.

What are the regulatory threats?

Chinese providers are significantly at danger of delisting from New York exchanges as Washington wishes to lower U.S. investors’ publicity to companies that do not comply with U.S. audit checks. Beijing has resisted allowing for this sort of foreign scrutiny of domestic corporations owing to likely release of delicate data.

In the last calendar year, Beijing has also tightened its manage of Chinese businesses’ skill to increase money overseas with new and forthcoming policies ranging from details security to submitting needs. The new regulations occur in the wake of Chinese ride-hailing app Didi’s U.S. listing in late June, which drew Beijing’s scrutiny on data and nationwide safety.

A single of the new regulations from the more and more effective Cyberspace Administration of China — which took outcome Feb. 15 — necessitates “community system operators” with own information on a lot more than one million users to endure a cybersecurity evaluation.

It’s unclear to what extent the rules implement to secondary listings in Hong Kong.

Nio pointed out the new rule, amid many other folks, in its submitting with the Hong Kong trade.

Primarily based on legal advice from its advisor Han Kun Regulation Places of work, Nio said the firm was “of the look at that the Cybersecurity Critique Actions will not have a product adverse effect on our business, financial ailment, running success and prospective buyers.”

As of Monday, “we have not been knowledgeable by any PRC governmental authority of any requirement to file for acceptance for this Listing,” the corporation explained.

Go through additional about electric autos from CNBC Pro

On information stability, the electrical car get started-up stated it has “capable for Quality III of China’s Administrative Measures for the Graded Protection of Data Protection.”

Quality 3 is “decently higher standard” for most professional sectors, said Ziyang Admirer, head of electronic trade at the Environment Financial Forum. He pointed out Beijing has distinct restrictions on car driving knowledge, that took influence Oct. 1.

Concerns around the security of Nio’s autopilot facts program stirred controversy in early August just after a deadly crash.

China’s securities commission and cybersecurity regulator, the Singapore trade, and Han Kun Legislation Places of work did not right away respond to CNBC’s requests for comment about Nio’s regulatory challenges.

The Hong Kong exchange stated it does not comment on unique firms or situations.

Listing “by introduction” is not a way to prevent cybersecurity scrutiny, but is a a lot quicker way for a corporation to get stated if it is not as focused on boosting cash, mentioned Bruce Pang, head of macro and method study at China Renaissance.

“Delisting danger is a genuine and emerging one. Each and every Chinese [American Depositary Receipt] ought to consider, hedge and manage it,” Pang mentioned, referring to U.S.-mentioned shares of Chinese firms. ADRs are shares of foreign organizations buying and selling on a U.S. trade.

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

Implications for other U.S.-shown Chinese corporations

“We started down a route of converting our shares out of the U.S. ADRs into Hong Kong,” Brendan Ahern, U.S.-dependent main financial investment officer of KraneShares, said in a cell phone job interview in early February.

He expects the agency will accelerate the conversions this yr as Chinese businesses increasingly obtain it hard to meet up with U.S. audit requirements, in addition to subsequent Chinese law. “The path regrettably appears to be pretty established,” Ahern explained.

Very last summer months, Li Car and Xpeng, two other U.S.-listed Chinese electric powered auto corporations, accomplished Hong Kong “twin major listings.” That enables experienced mainland China buyers to trade the shares as a result of a software that connects the mainland and Hong Kong marketplaces.

As of Friday’s near, Nio’s U.S.-detailed shares experienced a sector benefit of $33.31 billion. The stock has obtained 234.5% from the September 2018 initial community supplying selling price of $6.26 a share.

The stock plunged to a very low of $1.19 in late 2019, before a condition-led cash injection in early 2020 helped shares soar by far more than 1,100% that calendar year. But shares fell by 35% in 2021 and are down by more than 30% so significantly this yr.