What Nio Investors Should Know About Imminent Hong Kong IPO: Secondary Listing, No Stock Sale, Singapore Plans And More

Zinger Key Points
  • Nio is pursuing a secondary listing vs. the dual primary listing done by XPeng and Li Auto.
  • A secondary listing has advantages over a dual-primary listing in that the former allows more exemptions, is cost effective and a relatively speedier route.

Nio, Inc.'s NIO Hong Kong initial public offering plan is finally falling into place.

Nio confirmed on Monday that it has filed for a secondary listing of its Class A ordinary shares on the main board on the Hong Kong Stock Exchange, or HKEX. The EV maker has received a letter of in-principle approval from the exchange.

Nio's IPO Route: Nio's intention to list closer to home was initially reported by Reuters in early March 2021. It has taken a year for the company to execute on its listing plans.

Nio's domestic rivals XPeng, Inc. XPEV and Li Auto, Inc. LI have successfully completed the listing process in Hong Kong. XPeng began trading in Hong Kong on July 7 and Li Auto debuted on the exchange on Aug. 12.

Nio's delay had to do with its user trust shareholding, to which the HKEX took exception. The company's founder and CEO William Li had transferred one-third of his Nio stock to the user trust and also vested the right to sell the shares and realize the proceeds to Nio users.

Nio's shares are expected to commence trading on HKEX under the code "9866" on March 10. The HKEX-listed shares will be fully fungible with the ADSs listed on the NYSE.

Nio's Hong Kong Listing Vs. XPeng's & Li Auto's: Based on Nio's IPO prospectus filed with the HKEX, it appears the company's listing plans differ from the route adopted by XPeng and Li Auto.

Secondary Vs. Dual Primary Listing Nio is pursuing a secondary listing vs. the dual primary listing done by XPeng and Li Auto.

This doesn't come as a surprise, as in order for a company to take the secondary listing route on HKEX, it has to have a track record of two years of listing with a good compliance record and have a market capitalization of at least 10 billion Hong Kong dollars ($1.28 billion).

When XPeng and Li Auto IPO-ed in Hong Kong, they did not have a track record of two years as a public company.

A secondary listing has advantages over a dual-primary listing in that the former allows more exemptions, is cost effective and a relatively speedier route.

Companies with a secondary listing do not qualify for the Hong Kong Stock Connect under current regulations, BofA Securities analyst Ming Hsun Lee said in a note. The program is a mutual market access program through which Hong Kong and international investors can trade shares listed on the Shanghai Stock Exchange and Shenzhen Stock Exchange via HKEX and their existing clearinghouse and vice versa. Nio may not be able to benefit from this broader access program.

Related Link: Nio Analyst Predicts Over 200% Upside For Stock: 'EV Maker Has Clear Growth Prospects In 2022'

Nio Lists Through Introduction: Nio clarified in the filing that the listing will be by way of introduction and there are no shares being issued or sold in connection with the listing. The company has adequate cash balance to keep operations going in the near term. At the end of the September quarter of 2021, Nio had cash and cash equivalents, restricted cash and short-term investments of $7.3 billion. In November, Nio closed a $2-billion private placement.

The "way of introduction" listing will have neither share dilution nor new fundraising, and instead treasury shares of Nio and some shares owned by Tencent Holdings Limited TCEHY will be offered for trading on the HKEX, BofA's Hsun Lee said.

Nio has reached an agreement with the exchange that the user trust will maintain its superior voting rights, he added.

In comparison, XPeng raised about $1.8 billion by way of a share sale in Hong Kong and Li Auto collected about $1.5 billion.

Singapore Listing Ahead: Nio confirmed in the listing document that it has applied for secondary listing on the Singapore Exchange and the application was undergoing review by exchange authorities.

"We will make definitive plans of such listing and keep our shareholders informed of the status of the proposed listing on SGX-ST to the extent possible," the company said.

BofA's Hsun Lee said he sees the Hong Kong listing as providing Nio with an "extra financing channel" that could be considered in terms of hedging geopolitical risks.

At last check, Nio shares were rallying 7.5% to $22.51.

Related Link: Will Nio's Newly-launched ET5 Pose A Threat To Tesla's Model 3?

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