Chinese rival Tesla shares tumble on Hong Kong debut

GUANGZHOU, China – Shares of U.S. electric vehicle maker Xpeng rose at the opening before turning negative on Wednesday when they debuted in Hong Kong.

Xpeng issued 85 million Class A common shares at a price of HK $ 165 each. Those shares opened at HK $ 168, up 1.8%. Soon after, they fell to 162.50 Hong Kong dollars, about 1.5% below its listing price.

The electric car maker is already listed in the United States. Usually Chinese companies listed on Wall Street do what is called a secondary listing, usually in Hong Kong. This is where a company, listed on one stock exchange, sells shares on another.

But the Xpeng share offering is a dual primary listing. This means that it will be subject to the rules and oversight of US and Hong Kong regulators, which is not the case with a secondary listing.

The electric car maker said last month it would price the shares at HK $ 180 each. Xpeng raised gross proceeds of 14.02 billion Hong Kong dollars ($ 1.8 billion).

Chinese companies listed in the United States have sought to list in Hong Kong as a way to guard against tensions between China and the United States.

Earlier this year, the United States Securities and Exchange Commission passed rules that impose stricter audit requirements on foreign companies listed in the United States. These requirements carry the threat of delisting for companies that break the rules.

“I would say our listing in Hong Kong is a very strategic decision. I think obviously, you know, hedging against geopolitical risks is just one of the considerations,” Brian Gu, president of Xpeng, told CNBC’s Emily Tan.

“But in the long run, we would like to have a listing site that brings us closer to home because we are a consumer brand in China. Ultimately, we want our customers to be our shareholders and to have double the value. Main listing status in China. HK (Hong Kong) will give us the eligibility to be connected to Chinese capital markets. “

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But Chinese companies listed in the United States could also come under scrutiny at home. On Tuesday, Beijing said it would strengthen supervision of listed companies overseas. The government plans to improve the rules regarding cross-border data flows and security. The move comes after regulators launched a cybersecurity review at ride-sharing company Didi and forced app stores to remove it from download, days after it went public in the United States.

Xpeng, known for its P7 sedan and G3 SUV, delivered 6,565 vehicles in June, an increase of 617% year-on-year and a monthly record. The Guangzhou-based company delivered 17,398 vehicles in the second quarter of the year, above its own forecast.

In April, the automaker launched its third production model, the P5 sedan, as competition intensifies with rivals such as Li Auto, Tesla and Nio.

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