Why Is Nio (NIO) Stock Down Today?

view original post

Nio (NYSE:NIO) stock is down more than 8% today on news that the Chinese electric vehicle maker is dealing with an accounting problem that has raised concerns about its listing on the New York Stock Exchange.

A Nio (NIO) sign and logo on a tan concrete building.

Source: Sundry Photography / Shutterstock.com

Specifically, Nio has said 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.

Nio has made clear that it wants to remain listed on the Hong Kong and New York stock exchanges, but it seems the threat of a U.S. delisting is causing concerns among investors.

InvestorPlace – Stock Market News, Stock Advice & Trading Tips

So far this year, NIO stock has fallen 43%. Shares are down 62% over the past six months.

What Happened With NIO Stock

In a news release, Nio said that it was notified on May 4 by the U.S. Securities and Exchange Commission (SEC) that it is in violation of the Holding Foreign Companies Accountable Act due to an issue with its 2021 annual report. The issue is apparently that the auditor Nio used to help draft and review its annual report has working papers that have not been inspected or verified by the SEC or Chinese regulators.

The SEC has the authority to suspend NIO stock from trading on the New York Stock Exchange if it feels such an action is warranted upon further investigation of the auditor. That prospect has investors nervous, which is why Nio’s share price is slumping today.

Nio has said that it is actively pursuing solutions to the audit issue related to its annual report.

Why It Matters

The listing of Chinese companies on U.S. stock exchanges is becoming a bigger political and financial issue. The main complaint with Chinese companies on Wall Street is that they are not subject to the same stringent rules and regulations related to disclosure and financial reporting as publicly traded American companies. The SEC has been applying greater scrutiny to Chinese stocks over the past year.

At the same time, some high-profile Chinese companies have announced that they are delisting from U.S. exchanges, most notably ride-hailing company DiDi Global (NYSE:DIDI). The delisting resulted after probes into the company’s $4 billion initial public offering (IPO) last summer by both the SEC and Chinese regulators. DIDI stock has plunged 87% since its IPO to currently trade at $1.95 a share.

What’s Next for Nio

The uncertainty related to Nio’s accounting issue has the company’s stock under pressure today. The Shanghai-based company will need to reassure jittery investors that it can resolve the SEC’s concerns and remain publicly listed in the U.S. — and do so in a hurry.

Should the threat of delisting hang over Nio for a prolonged period, it will likely push the share price down further.

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.

More From InvestorPlace

The post Why Is Nio (NIO) Stock Down Today? appeared first on InvestorPlace.