What you need to know about the way NIO choose for Hong Kong listing

Chinese electric vehicle (EV) maker Nio Inc. (NIO) has received approval from the Hong Kong Stock Exchange (HKG) for a secondary listing of its Class A ordinary shares. The shares are expected to start trading at $0.00025 each on March 10, 2022, under the stock code 9866.

The company said it also applied for a “way of introduction” listing on the main board of the Singapore Stock Exchange.

Listing by introduction is an application for listing of shares already in issue where no marketing arrangements are required. This is because the existing shares for which listing is sought are already of such an amount and so widely held that there would be an open market for the trading in these shares.

Since only existing shares are listed by introduction, it follows that no new shares will be issued and no additional funds will be raised.

Selling shares to raise capital is referred to as anInitial Public Offering (IPO),the amount being raised from the issue is known in advance and when no capital is being sought in the market it is referred to as aListing by Introduction.

Given that said company is listing shares that had already been fully paid for, the aim of listing by introduction is not to raise capital immediately, but to be able to do so at a later date when the company is in need of capital. It only provides the company with a regulated environment within which to operate and a platform to trade shares with the public investors in the capital markets.

Listing by introduction allows companies to improve their business in the country where they are listed.

There are two maindifferent ways for Chinese companies to return to Hong Kong for listing: one is dual primary listing in Hong Kong, and the other is secondary listing. Except for these two ways, a listing by way of introduction can also be considered by a issuer.

Generally, dual listing refers to a company listing its shares on a second exchange in addition to its primary exchange.Dual listings are primarily used when the geographical reach or listing requirements of two exchanges differ broadly.

On parallel, secondary listings refers to any listing of a security on a stock exchange other than on the exchange where it has its primary listing.Secondary listings are often used when the listing requirements of two exchanges are similar.

In terms of the way of introduction, according to the HKEX rule,an issuer may list its securities on the HKEX by way of introduction without any offer being made for the subscription/sale of its securities if it complies with the relevant shareholding spread requirements.

Listing through introduction will be permitted in exceptional circumstances and there must not have been a marketing of the securitiesin Hong Kong within 6 months prior to the proposed listing.

The listing approval procedures for a new listing by introduction are the same as those for initial public offerings (IPO). And the Listing Division of the SEHK is responsible for reviewing listing materials and administering the listing process under the Listing Rules.

Before investing, investors could read the listing prospectus and visit the HKExnews website to check for any updates relating to the company being listed by introduction.

Investors could take a similar approach like investing in IPO shares: read the listing document or prospectus of the company to understand its business nature, its performance, its outlook, and to find out any corporate action being taken recently.