What happened
Shares of Nio (NIO -0.48%), a China-based electric vehicle maker, were plummeting today after the company listed its shares on Hong Kong's stock exchange yesterday. Investors are concerned that some Chinese stocks could potentially be delisted from U.S. stock exchanges and are exiting their positions.
The electric vehicle (EV) stock was down by 6.6% as of 12:06 p.m. ET.
So what
Some China-based companies have begun listing their shares on Hong Kong's exchange as the U.S. Securities and Exchange Commission (SEC) begins to take a closer look at Chinese companies listed on U.S. stock exchanges.
Image source: Getty Images.
Under the Holding Foreign Companies Accountable Act, which was passed just two years ago, the SEC can delist a foreign company if it fails to provide the audited financial records to American regulators for three consecutive years.
The SEC said this week that five Chinese companies have failed to do so, and the news has sent many Chinese stocks -- including Nio -- plummeting.
While Nio isn't one of the companies on the list and there isn't any current information indicating that its shares will be delisted from the U.S. market, the company appeared to be taking a precautionary measure by dual-listing on Hong Kong's stock exchange.
Now what
It's not all that surprising that Nio's share price would slide in the U.S. after listing on Hong Kong's exchange. If investors are concerned about even the remote possibility that Nio could come under the scrutiny of the SEC some investors will be spooked and sell their shares.
Additionally, this concern is coming at a time when growth stocks like Nio are already experiencing significant volatility -- Nio's stock is down 56% over the past six months -- which is adding to investors' worries.
