What happened
Shares of Nio (NIO +2.82%) crumbled Monday morning and were down 6.5% lower as of noon. The broader market weakness, a sell-off in electric vehicle (EV) stocks, a large shareholder reportedly unloading its entire stake in Nio, and a development in China all combined to put the stock under pressure today.
So what
Stocks across the EV industry were taking a hard hit this morning. Although most EV stocks were reacting to company-specific news, the ripple effects were felt through the industry as investors continue to flee growth stocks and volatility gripped the broader markets.
Image source: Getty Images.
Investors also seem to be off-loading Nio shares after the risk of the stock being delisted in the U.S. deepened last week. That's when the U.S. Securities and Exchange Commission (SEC) named Nio as a commission-identified issuer. The SEC identifies such issuers or businesses as those that operate from a foreign jurisdiction and whose audit reports have not been accessible to the U.S. regulators for inspection. If such reports can't be accessed for inspection for three years, shares of such foreign companies are liable to be delisted from the U.S. under the Holding Foreign Companies Accountable Act (HFCAA).
Nio immediately got down to action and announced its proposal to list shares on the Singapore Exchange. In March, the company listed its stock in Hong Kong to provide U.S. investors with an alternative platform to trade Nio shares in the event of the stock's delisting in the U.S.
For now, the prospect of having their shares in a company delisted, regardless of the reason, is spooking investors in Nio.
In between, the latest regulatory filing from Norway's central bank, Norges Bank, reportedly reflects no holding in Nio. As of the end of the fourth quarter, Norges Bank held nearly 13.7 million shares in Nio. That means the bank sold its entire stake in Nio in the first quarter.
Now what
Even as the SEC publicly continues to name foreign companies at the risk of delisting, speculation is ripe that U.S. and Chinese regulators are already in talks to resolve the issue. Reuters even reported last week that a team from the U.S. Public Company Accounting Oversight Board (PCAOB) had arrived in Beijing for the talks.
NYSE: NIO
Key Data Points
The PCAOB, however, refuted the Reuters report this past weekend, even specifying that it has not sent "any personnel to China since 2017," as reported by electric-vehicles.com.
In short, Nio continues to face the risk of delisting, and that fear was reflected in the stock's fall today. A large shareholder dumping its stake in the EV stock only added to investors' worst fears.
