NIO (NYSE:NIO), the pre-eminent Chinese language EV firm, has seen its share price brutally hammered over the previous few days. As an illustration, relative to the opening price of $54.24 on Monday, the stock has now registered a lack of over 14 %, based mostly on the present pre-market share price of $46.60. In fact, the loss was a lot worse yesterday, when NIO shares appeared able to fall beneath the $40 price threshold, having opened the common buying and selling session on the $40.15 price degree.
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On the coronary heart of this share price swoon by NIO and different Chinese language high-flying stocks is a invoice handed by the U.S. Congress on Wednesday. The legislation, which has already been accredited by the Senate and now awaits the presidential seal of approval, would search to delist any Chinese language firm ought to it fail to adjust to the U.S. audit oversight guidelines inside a interval of three years. The invoice, formally generally known as the Holding International Corporations Accountable Act, states the next:
“This bill requires certain issuers of securities to establish that they are not owned or controlled by a foreign government. Specifically, an issuer must make this certification if the Public Company Accounting Oversight Board is unable to audit specified reports because the issuer has retained a foreign public accounting firm not subject to inspection by the board. Furthermore, if the board is unable to inspect the issuer’s public accounting firm for three consecutive years, the issuer’s securities are banned from trade on a national exchange or through other methods.”
Keep in mind that some Chinese language corporations have been utilizing an obscure loophole within the American authorized framework to evade U.S. audit oversight compliance necessities. This invoice goals to rectify these authorized lacunae in an effort to guarantee uniform authorized compliance.
This brings us to the crux of the matter. Traders ought to observe that the invoice poses no speedy threat as any delisting motion, if vital, would solely happen after the lapse of a 3-year interval. Furthermore, in keeping with the current feedback by a NIO spokesperson, the corporate views itself as compliant with these audit oversight guidelines, thereby precluding any punitive measure inside the purview of this invoice.
So far as fundamentals are involved, NIO is actually racing forward at an astonishing tempo. The corporate has been posting report deliveries in H2 2020. Furthermore, it’s aiming to spice up its month-to-month manufacturing capability to 7,500 units in January 2021. Moreover, by the tip of 2021 or early 2022, NIO goals to extend its manufacturing capability to an astounding 25,000 models monthly, equating to an annual capability of 300,000 models. As well as, NIO can be seeking to enter the European markets in H2 2021.
Given NIO’s growing manufacturing capability and bettering financials, its bearish case seems fairly flimsy. Consequently, buyers ought to view the current decline within the firm’s share price as a method to scale back the general value base of their holdings.
The writer doesn’t maintain any place in NIO shares