The focus will shift to the expected production ramp-up of three new models starting in late March this year.

(Image credit: Nio)

Nio said today it has applied to list its issued shares in Hong Kong by way of introduction and received a letter of in-principle approval from the Hong Kong Stock Exchange.

According to Deutsche Bank analyst Edison Yu's team, the overhang over Nio's delisting from the US should largely be gone now and the focus will shift to the expected ramp-up of production of three new models starting in late March.

The listing will not raise additional capital, meaning no dilution, and instead will use a listing by way of introduction approach in which Nio and Tencent will lend 41.4 million shares to a designated dealer to facilitate initial trading, the team noted in a research note released today.

Over time, Nio expects a significant number of existing holders to naturally convert their ADRs into H shares, the report noted.

Yu's team believes that Nio's management wants to avoid raising capital against the backdrop of the stock's recent sharp decline.

In addition to the Hong Kong listing, Nio has also submitted an application for listing by way of introduction in Singapore, which is currently awaiting approval, and Yu's team believes this was done as a supplementary option in case the Hong Kong listing process drags on even longer.

Nio's proposed listing in Hong Kong is different from the dual primary listings of its local peers Xpeng Motors and Li Auto, on which Yu's team also provided their views:

We had initially expected Nio to conduct a dual primary HK listing, providing added protection in respect to a potential US delisting and benefit of inclusion into the Mainland Stock Connect mechanism.

In response, management believes a secondary listing provides ample protection and suggested that the HK exchange is well aware of the broader US delisting risk. Hence, a process to convert a secondary listing to primary one would not be overly difficult.

Moreover, Nio thinks it can better tap into the Mainland China investor base through a direct A-share listing of its Nio China entity as opposed to leveraging the Mainland Connect.