XPeng drives dual-primary listing wave in HK

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Chinese electric vehicle (EV) maker XPeng has raised HKD14.03 billion (USD1.8 billion) from its Hong Kong share sale, making it the first dual-primary listing with a weighted voting rights (WVR) structure on the bourse. The stocks started trading on 7 July.

Wang Yi

XPeng is the first EV maker seeking a “homecoming listing” in Hong Kong, followed by its major competitor Li Auto. NIO is said to delay its Hong Kong secondary listing to early next year, according to Bloomberg.

Unlike other homecoming listings, XPeng went public in Hong Kong through a dual-primary listing, rather than a secondary listing, because the latter requires firms to be trading in eligible exchanges for at least two years. The Guangzhou-based company began trading in the New York Stock Exchange in August 2020.

That means XPeng had to adhere to listing requirements of both Hong Kong and US bourses, facing stricter standards than previous homecoming listings by other big names, from Alibaba to Ctrip.com.

Sullivan & Cromwell acted as Hong Kong and US counsel for the issuers, while Fangda Partners was PRC legal counsel. Harneys advised on Cayman Islands law.

JunHe was the PRC legal adviser to the joint sponsors, JP Morgan Securities and Bank of America Merrill Lynch, while Freshfields Bruckhaus Deringer advised them on Hong Kong and US law.

Raymond Ng

Wang Yi, a Shanghai-based partner at JunHe, who co-led the team on the deal, said: “Before XPeng, there were not many precedents for dual-primary listings. The deal tests law firms on their understanding of regulatory requirements in the mainland, Hong Kong and the US, as well as their ability to work.”

Raymond Ng, Hong Kong-based co-head of Harneys’ global banking & finance and corporate groups, said as the first Chinese company with a WVR structure to complete a dual primary listing in Hong Kong, XPeng’s listing “sets a successful precedent for US-listed Chinese companies looking to gain market access to Chinese investors via Stock Connect by listing on the Hong Kong stock exchange”.

XPeng’s Hong Kong debut came a few days before Chinese regulators proposed new rules on overseas listings, especially companies that own sensitive data seeking US IPOs. Not only that, the US Securities and Exchange Commission is also tightening oversight over listings of Chinese companies.

The series of regulatory changes have delayed planned floats as companies wait for clearer policy guidance. “XPeng’s rapid listing timetable helps it avoid the impact of policy uncertainties,” said Wang. “Of course, XPeng still has to comply with subsequent regulatory requirements. We have to keep constant attention on it.

“We expect to see the most significant change in the [PRC] regulatory framework in more than a decade. There are still many unanswered questions.”

Wang also expects more Chinese companies to switch listing venues to Hong Kong from the US. “I believe that Hong Kong will become the first choice for Chinese companies to list overseas in the future,” he said. “Given uncertainties of overseas listing policies, companies facing greater risks in data compliance ̶ especially internet platform companies and data-heavy technology firms ̶ and should consider dual listings in the city.”

Wang said Hong Kong listings could help Chinese companies reach international investors. “At the same time, as a part of China, Hong Kong has closer co-operation with the central government in terms of compliance,” he said.

However, he predicted that many companies would still choose to list in the US. “Hong Kong and US markets have different investment preferences and regulatory requirements, which will continue to exist for a long time. Hong Kong is still not the place for certain companies.”

Ng, who led Harneys’ team on the listing, also predicts more US-listed Chinese firms to seek “homecoming listings” in due course. “Listing in Hong Kong provides a gateway for issuers to grow their investor base to China,” said Ng. “It also allows issuers to hedge against the risks associated with geopolitical uncertainty.”

Ng said a key would be the differences in the listing rule requirements between the US and Hong Kong. “The Hong Kong listing rules are more meticulous on corporate governance matters as compared to their US counterparts, and as such it requires active dialogue with the regulators to ensure that the governance documents comply with the Hong Kong listing rule requirements,” he said.

Apart from Wang, the JunHe team had partners Joe Wan and George Shang Shiming working on the deal.

The cross-border team of Sullivan & Cromwell comprised Hong Kong managing partner Ng Kay Ian and partner Lin Ching-yang in Hong Kong, as well as the firm’s Palo Alto managing partner, Sarah Payne.

Fangda Partners’ team advising on this transaction included partners Jeffrey Ding, Chen Tianyi and Patrick Li, and counsel Wei Jianbo.

While Ng oversaw the Harneys’ team on the listing, the firm’s corporate specialist, Lily Zhang, led the XPeng deal, supported by managing partner Vicky Lord.

Freshfields’ team was led by partner and China chairman Teresa Ko, and US partner Calvin Lai.

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