Shares of Nio (NYSE:NIO) stock are taking a beating today, down more than 12% currently and reaching a new 52-week low of $17.22. Meanwhile, the iShares MSCI China (NASDAQ:MCHI) exchange-traded fund (ETF) saw its price trade at a new 52-week low of $51.09 as well.
Today, the Chinese electric vehicle (EV) maker made its debut on the Hong Kong Stock Exchange, closing at 158.90 Hong Kong dollars. In USD terms, that amounts to a share price of $20.32. As part of the listing, Nio did not issue new shares or raise capital. Besides the Hong Kong listing, there also seems to be no company-specific news concerning Nio.
So, why are shares of NIO stock down today?
Why Is NIO Stock Down Today?
It seems that Nio’s price decline can be attributed to the general weakness of Chinese stocks regarding regulatory policies. What’s more, the U.S. Securities and Exchange Commission (SEC) has identified five Chinese companies failing to abide by the Holding Foreign Companies Accountable Act (HFCAA). The HFCAA was passed in 2020 and seeks to delist companies from U.S. exchanges if auditors are unable to “review company audits for three consecutive years.”
Nio has not been late to submit financial statements. However, KraneShares CIO Brendan Ahern did state the following:
“All the Chinese listed ADRs will likely end up on the list, because none of them will be able to comply with requests to have their audits reviewed.”
Since Nio fits into the category of an American depository receipt (ADR), Crane believes the company will eventually be held accountable under the HFCAA. Ahern adds that Nio won’t be able to have their filings audited by U.S. regulators “because Chinese law prohibits the auditor to provide their review to U.S. regulatory authorities.” Nio cited delisting concerns as one of the reasons why it listed shares in Hong Kong.
Could the NYSE Delist Nio?
The SEC has not yet delisted any of the companies in violation of the HFCAA. As of now, the earliest date for delisting due to the HFCAA is 2024. This is because the “clock” for companies in violation started in 2021. However, investors are concerned that further tensions between the U.S. and China could lead to a possible NIO stock delisting.
For now, Nio remains a high-growth company with an uncertain geopolitical outlook. During February, the EV maker delivered 6,131 vehicles. That delivery figure was down from 9,652 deliveries in January. However, the lower February deliveries could possibly be attributed to the Lunar New Year, which is a week-long holiday.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
