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

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Outside the New York Stock Exchange, William Li (Nio Founder and Chief Executive Officer) celebrates his company’s IPO.

Photo by NYSE

BEIJING — U.S.-listed Chinese electric car company NioIt will offer shares to trade in Hong Kong from March 10th, the start-up announced Monday.

This move is being made as the regulatory risk in China and America increases for Chinese listed companies in New York. It also adds compliance challenges to investors and businesses.

Nio will not raise new capital or issue new shares, as is the case with many U.S. listed Chinese stock offerings. The company will instead “list by way of introduction,” meaning that a part of its existing shares can be traded in Hong Kong.

Nio intends to make those shares available for trading starting next Thursday under the ticker 9866, according to a filing with the Hong Kong stock exchange.

According to the Chinese startup, it applied for “way of introduction” listing at the Singapore Stock Exchange. Electric vehicle startup said that it does not intend to exchange the Singapore-listed shares.

Which regulatory risks are there?

Chinese businesses are becoming more at risk of delistingWashington, through New York’s exchanges, wants to decrease U.S. investor’s exposure to companies that do not comply with U.S. inspection checks. Beijing is refusing to allow foreign inspection of domestic companies due to the possibility of the release of sensitive data.

Beijing also increased its controls over Chinese companies’ overseas capital raising ability in the past year by introducing new rules, ranging from filing requirements to data security. These new rules follow the launch of Chinese ride-hailing apps Didi’The U.S. was listed late June and drew Beijing’s scrutiny on data and national security.

One of the new rules from the increasingly powerful Cyberspace Administration of China — which took effect Feb. 15 — requires “network platform operators” with personal data on more than one million users to undergo a cybersecurity review.

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

Nio, along with many other changes, noted in the filing to the Hong Kong stock exchange.

On the advice of Han Kun Law Offices as its legal advisor, Nio indicated that it believed the Cybersecurity Review Measures wouldn’t have a material adverse impact on the company’s business, financial condition or operating results.

The company stated that they had not received any notification from any PRC governmental authorities regarding the requirement for them to submit for approval of this Listing as of Monday.

CNBC Pro provides more details about electric vehicles

According to China’s Administrative measures for the Graded Protection of Information Security, Grade III of the Chinese electric vehicle start-up has been approved.

Ziyang Fan from the World Economic Forum, who heads digital trade, stated that grade three represents a “decently high level” standard for many commercial sectors. Beijing’s regulations regarding auto-driving data were enacted Oct. 1, he said.

Questions over the security of Nio’s autopilot data systemAfter a fatal accident, the crash caused controversy in August.

CNBC reached out to Han Kun Law Offices and China’s Securities Commission for information about regulatory risk in Nio.

Hong Kong’s exchange stated that it doesn’t comment on specific companies and cases.

While listing “by intro” doesn’t protect cybersecurity, it does allow companies to be listed faster if the company isn’t as concerned with raising money. Bruce Pang, China Renaissance head of macro strategy research, stated that this is an effective way to do so.

The risk of being delisted is real and growing. All Chinese [American Depositary Receipt]Pang stated that U.S. listed shares held by Chinese companies should be evaluated, hedged, and managed. ADRs refer to stocks held by foreign companies that trade on U.S. stock exchanges.

Didi stated in December that it would delist New York to pursue a Hong Kong listing. However, the date was not specified.

The implications for U.S.-listed Chinese businesses

In a telephone interview, Brendan Ahern (U.S.-based chief investor officer at KraneShares) stated that “We began down a path to convert our shares out the U.S. ADRs onto Hong Kong.”

As Chinese businesses find it increasingly difficult to comply with U.S. law and audit requirements, Ahern expects that the firm will speed up the conversions in this year. Ahern indicated that “the path unfortunately appears pretty set.”

The following summer was Li Auto XpengTwo other U.S.-listed Chinese electric vehicle companies have completed Hong Kong “dual primaries listings”. The program connects Hong Kong with mainland China markets and allows investors from mainland China to trade these shares.

At Friday’s closing, Nio shares U.S.-listed had a market capitalization of $33.31 million. From the Sept. 2018 initial public offer price of $6.26 per shares, the stock gained 234.5%.

Stock fell to an all-time low of $1.19 late in 2019, but recovered. state-led capital injection in early 2020 helped shares soarThat year, the shares fell by over 1,100%. Shares fell 35% in 2021, and they are currently down more than 30%.

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