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An autonomous electric vehicle NIO EP9.
Lintao Zhang / Getty Images
On Wednesday, the House of Representatives unanimously passed a bill that sets the stage for the delisting of Chinese companies from U.S. stock exchanges, including electric vehicle makers such as
NIO,
XPeng,
and
Li Auto.
Companies must comply with US audit oversight rules within three years. Stocks are reacting in after-hours trading, trading lower, but the subdued reaction seems to indicate that investors are expecting things to happen over time.
NIO stock (ticker: NIO) is down around 2.8% after-hours trading. XPeng (XPEV) shares are down 3%. Li Auto (LI) stock is down 0.7%.
Representatives for the three Chinese EV makers were not immediately available for comment. But the bill, which is expected to be enacted by President Donald Trump, affects all three.
Li Auto’s prospectus illustrates the problem: “The audit report included in this prospectus is prepared by an auditor who is not inspected by the PCAOB and, as such, our investors are deprived of the benefits of such an inspection. . ” The PCAOB is the Accounting Supervisory Board for Public Enterprises. “In addition, the adoption of rules, laws or other efforts to increase US regulatory access to audit information could create uncertainty, and we could be delisted if we are not able to. meet the PCAOB inspection requirement on time. ”
Similar language is included in documents filed by XPeng and NIO’s Securities and Exchange Commission.
The situation is a bit more significant for Chinese VE players as they only have a US stock quote. Other Chinese companies are listed in several jurisdictions. Yet all three have time to comply.
Most of the research analysts covering the three stocks are based in Hong Kong or China and have yet to write on the matter. Investors should expect updates in the coming days.
VE’s Chinese stocks have been investors’ favorites so far in 2020. All three stocks have risen 133% on average over the past three months, crushing
S&P 500
and
Dow Jones Industrial Average.
Write to Al Root at [email protected]
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