Nio Bounces Off Bottom Ahead Of Thursday's Hong Kong Listing: What Investors Should Know

Nio, Inc. NIO shares, which fell to their lowest level in 1-1/2 years on Tuesday, are rebounding from the depressed level. In addition to the broader market strength, the stock is receiving support from the optimism around its planned debut on the Hong Kong stock exchange on Thursday.

Nio's Downward Spiral: Nio stock had four straight sub-$20 closes in the run-up to Wednesday's session. After a dismal 2021, when it underperformed relative to its peers, the stock got off to a not-so-promising start in the new year. Geopolitical tensions and macroeconomic worries exacerbated the weakness in Nio shares.

The stock had a hard landing, going from $66.99 on Jan. 11, 2021 to Tuesday's trough of $17.58, a slump of over 73%. Much of the weakness can be traced back to production disruptions, on account of which volume could not kick into top gear. These disruptions in turn were due to the industry-wide issue of chip and component shortages.

Nio, meanwhile, did not further its cause by not having any new product launches in 2021.

But for Nio, all is not lost yet. The company can still put its best foot forward in 2022, given the multiple new product launches scheduled for the year. The first-ever sedan model named ET7, a budget model sedan named ET5, and the ES7 SUV are all expected to be available to customers this year.

Credit Suisse analyst Bin Wang said in a recent note he expects Nio's sales volume to increase to 150,000 units in 2022, up from 91,429 units in 2021.

Related Link: Nio Analyst Sees Opportunities In 2022 And Beyond; So Why Is He Halving The Price Target?

Nio Goes Closer To Home: An imminent catalyst for Nio shares will be the stock's debut on the Hong Kong exchange, beginning on Thursday, under the ticker code 9866. A secondary listing in Hong Kong is considered positive for the stock. The simmering tensions between the U.S. and China have always weighed down on U.S.-listed Chinese stocks due to the risk of potential delisting.

Shares of Nio's domestic peers XPeng, Inc. XPEV and Li Auto, Inc. LI, are already trading in Hong Kong by way of dual-primary listings. Nio's listing, however, was delayed due to the exchange taking exception to its user trust holdings.

Nio has chosen to list by way of introduction, without diluting its equity capital. This mode of listing is expeditious as well as cheaper compared to the traditional route.

A prospectus supplement filed with the SEC on Wednesday showed that CHJ Limited, a wholly-owned special purpose vehicle of Nio, and Image Investment have agreed to lend to certain designated dealers up to 41.4 million Class A shares, representing 2.7% of the company's outstanding shares, upon listing. The designated dealers will then use the shares to create additional liquidity in Hong Kong.

Related Link: Nio Vs. XPeng Vs. Li Auto: How 2022 Is Shaping Up For Chinese EV Stocks

What's In Store For Nio Stock: A successful Hong Kong listing alone cannot guarantee smooth sailing for Nio's shares. The NYSE-listed ADSs could extend their gains on Thursday if the cues from Hong Kong are positive. Given Nio has strong mindshare among people back at home, the stock could draw in huge buying on its debut session, provided no external factors spoil the company's party.

In the near- to midterm, the stock trajectory depends on the company's ability to execute on its plan and deliver its newest products on time, as well as how well it can navigate the supply-side challenges.

Nio shares closed 12.24% higher on Wednesday at $20.17.