Nio (NYSE:NIO) stock looks to be recovering from a sharp selloff yesterday on reports that the Chinese electric vehicle maker plans to pursue a secondary listing of its shares in Singapore.
NIO stock is up about 1% today after the company said that it is planning a secondary listing of its shares in Singapore. The Shanghai-based automaker’s stock already trades in both New York and Hong Kong. Singapore would be the third global stock exchange on which Nio’s shares trade.
Importantly, news of the proposed Singapore listing comes a day after Nio’s stock plunged 15% to $15.38 after disclosing that the U.S. Securities and Exchange Commission (SEC) is investigating an accounting problem at the company.
Year to date, NIO stock has declined 54%. Shares are down 64% over the past six months.
What Happened With NIO Stock
Nio disclosed yesterday that it is not in compliance with the U.S. Holding Foreign Companies Accountable Act due to an audit issue related to the company’s annual report. More specifically, Nio said that it has been notified by the SEC that it is in violation of the legislation.
As part of the HFCAA, the SEC can suspend NIO stock from trading on the New York Stock Exchange if it feels such an action is warranted upon further investigation. That prospect spooked investors, which led to the sharp downturn in NIO stock yesterday.
News today that Nio is now planning to list its shares in Singapore appears to have alleviated some concerns, which is why Nio’s share price is now reversing.
Why It Matters
Nio is not alone in facing a growing threat of U.S. delisting. In fact, after adding more than 80 companies to its list, the SEC is now keeping an eye on more than 120 Chinese-based companies. This all stems from the increased accounting standards that come from the HFCAA legislation.
At the same time, investors are also watching high-profile companies like DiDi Global (NYSE:DIDI) choose to delist in the U.S. Following probes from U.S. and Chinese regulators, DIDI shareholders will vote on a proposed NYSE delisting in just a few weeks.
What’s Next for Nio
Nio needed to move quickly to reassure investors that it can either resolve the SEC’s concerns and remain publicly listed in the U.S. or find an alternative solution. The Chinese electric vehicle maker appears to have done this by moving quickly to pursue a listing in Singapore while reiterating that it is cooperating with the SEC investigation.
Whether these steps can help NIO stock long term remains to be seen. But for today at least, it seems to have stopped the slide in the company’s share price.
On the date of publication, Joel Baglole did not have (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.
