- Nio’s (NIO) Singapore listing isn’t going to do investors any favors.
- Recent earnings results show weakness.
- Nio is a surprisingly minor player in its biggest market.
I’ve long been a proponent of Chinese EV manufacturer Nio (NYSE:NIO) and its stock. However, a host of recent factors is causing me to change that opinion. Nio’s current problems aren’t simply going to go away.
The notion that Nio is down only because of current market forces is a dangerous one to follow. Instead, there are much bigger problems at hand.
Nio Stock Singapore Listing
The writing’s on the wall: Nio could very well delist from the New York Stock Exchange. It’s clear that even if that doesn’t happen tensions between the U.S. and China are bound to persist. It’s also clear that Nio will soon be listed on the Singapore Exchange.
The company’s Class A shares will be listed on the Singapore Exchange May 20 as per its website. To be sure, NIO stock will continue to be primarily listed on the New York Stock Exchange.
But investors would have to be blind not to see the continuing pattern that has emerged: Investor capital is migrating away from the western hemisphere and back to the eastern hemisphere.
After all, Nio recently listed its shares in Hong Kong earlier this year.
So an increasing portion of investor capital is bound to come from investors proximal to those exchanges. That will upset a portion of the U.S. investor base that has propped up the company for the majority of the time the company has been listed following its debut in 2018 on the New York Stock Exchange.
Increasing scrutiny from U.S. auditors only provides greater justification for Nio in this move.
But investors must also consider the weakness in the company’s March earnings report. That earnings report showed a net loss of $336.4 million, an increase of 54.4% from the same period a year earlier. Equally worrisome was the fact that the loss represented a 156.6% increase on a sequential basis.
It’s difficult to find a lot to be positive about within those massive net loss figures. Sales increased 49.3% and yet net losses increased 54.4%. Yes, there is an ongoing pandemic and supply chain issues but I’d argue that those factors don’t justify the drop.
Poor Sales in China
Here’s the other thing to note about Nio: It doesn’t sell cars in the U.S. and it isn’t dominant in its domestic market. The fact that the company has little connection to the U.S. should give investors pause.
Nio cars are also sold in Norway. But make no mistake, China is its biggest market. It only began selling in Norway in 2022 — meaning all 91,429 Nio vehicles sold in 2021 were sold in China.
But those 91,429 EV sales only made it the ninth-largest EV seller by volume in China in 2021. And this is an important fact: Nio doesn’t dominate the Chinese EV sector, not by a long shot.
What to Do With Nio Stock
All of those factors lead me to believe that Nio’s current woes are more than temporary. I can’t see why U.S.-based investors are going to rush back into the company’s shares given all of these factors.
What I can see happening is that Nio migrates its investor capital base much nearer its geographic home. But if you aren’t playing on those exchanges, I don’t see the benefit of owning NIO stock now or anytime soon.
On the date of publication, Alex Sirois 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.