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Chinese electrical automobile start-up Nio plans to listing in Hong Kong on March 10

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Nio founder and CEO William Lee poses exterior the New York Stock Exchange to have fun his firm’s IPO.

Photo: NYSE

Beijing — US-listed Chinese electrical automobile firm NIO The start-up, introduced on Monday, is about to supply its shares for buying and selling in Hong Kong on March 10.

The transfer comes amid elevated regulatory danger within the US and China for Chinese corporations listed in New York, posing compliance challenges for companies and traders.

However, not like many US-listed Chinese inventory choices in Hong Kong, Nio shouldn’t be elevating contemporary funds or issuing new shares on this itemizing. Instead, the corporate is doing a “listing by way of introduction”, which means {that a} portion of the present shares will probably be accessible for buying and selling in Hong Kong.

NIO plans to supply these shares for buying and selling beneath the ticker “9866” beginning subsequent Thursday Filing with the Hong Kong Stock Exchange.

The Chinese startup mentioned it has additionally utilized for a “mode of introduction” itemizing on the principle board of the Singapore Stock Exchange. The electrical car firm mentioned it has no plans to make shares listed in Singapore and Hong Kong interchangeable.

What are regulatory dangers?

Chinese corporations are rising quickly risk of being unlisted From the New York exchanges as a result of Washington needs to scale back US traders’ publicity to companies that don’t adjust to US audit checks. Beijing has resisted permitting such international investigations of home companies due to the potential launch of delicate data.

In the previous yr, Beijing has tightened its controls on the flexibility of Chinese companies to boost capital abroad with new and upcoming laws starting from knowledge safety to submitting necessities. New guidelines come within the wake of Chinese ride-hailing app Elder sister’s US itemizing in late June, which attracted Beijing’s investigation on data and national security.

One of the brand new guidelines from China’s more and more highly effective Cyberspace Administration – which took impact on February 15 – requires “network platform operators” with private knowledge on a couple of million customers to bear a cybersecurity evaluation.

It is not clear to what extent the rules on secondary listings apply in Hong Kong.

Among many others, Nio talked about the brand new rule in its submitting with the Hong Kong alternate.

Based on authorized recommendation from its advisor Han Kun Law Office, Nio mentioned that the corporate “is of the view that the cyber security review measures will not have any adverse impact on our business, financial position, operating results and prospects.”

As of Monday, “we have not been notified by any PRC government authority of any requirement to file for approval for this listing,” the corporate mentioned.

Read extra about electrical autos from CNBC Pro

On knowledge safety, the electrical automobile start-up mentioned it “qualified for Grade III of China’s Administrative Measures for Graded Protection of Information Security.”

Jiang Fan, head of digital commerce on the World Economic Forum, mentioned grade three is a “decently high standard” for many business sectors. He identified that Beijing has particular guidelines on auto driving knowledge, efficient October 1.

Questions over the security of Nio’s autopilot data system Controversy erupted after a deadly accident in early August.

China’s securities fee and cybersecurity regulator, the Singapore Exchange and the Han Kun Law Office, didn’t instantly reply to CNBC’s requests for remark in regards to the regulatory dangers of NOO.

The Hong Kong Exchange mentioned it doesn’t touch upon particular person corporations or issues.

Listing “by introduction” shouldn’t be a strategy to escape cybersecurity scrutiny, mentioned Bruce Pang, head of macro and technique analysis at China Renaissance, however a quicker means for an organization to get listed if it is not centered on elevating funds. Is.

“Reducing danger is an actual and rising danger. Every Chinese [American Depositary Receipt] Referring to US-listed shares of Chinese corporations, Pang mentioned, it needs to be evaluated, hedged and managed. ADRs are shares of international corporations that commerce on a US alternate.

Didi mentioned in early December she deliberate to take away the listing from New York and listing Hong Kong, however didn’t specify a date.

Implications for different US-listed Chinese corporations

“We began a route of converting our shares from US ADRs to Hong Kong,” CranShares’ US-based chief funding officer Brendan Ahern mentioned in a telephone interview in early February.

He expects the agency to speed up the conversion this yr as it’s changing into more and more tough for Chinese corporations to fulfill US audit necessities along with complying with Chinese regulation. “The path unfortunately seems very set,” Ahern mentioned.

the final summer time, lee auto And Xpeng, two different US-listed Chinese electrical automobile corporations, Hong Kong “dual primary listing.” It permits traders from mainland China to commerce shares via a program linking the markets of the mainland and Hong Kong.

As of the tip of Friday, Nio’s US-listed shares had a market worth of $33.31 billion. The inventory is up 234.5% from its September 2018 preliminary public providing worth of $6.26 per share.

The inventory fell to a low of $1.19 on the finish of 2019, earlier than State-led capital injections helped stocks climb in early 2020 over 1,100% that yr. But shares fell 35% in 2021 and are down greater than 30% to date this yr.

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