Kissing Regulatory Butt on Both Sides of the Pacific

 Xpeng, an electric car manufacturer born in China but with an increasingly large footprint in the United States, has recently held two IPOs, one on NYSE last August, one on the Hong Kong Exchange just days ago. 

When a company holds a second IPO, it is typically for a "secondary listing." Their first pop still establishes their primary listing. But Xpeng arranged these as twin primary listings.  

"Aren't there are costs involved in doing things this way? Why did XPeng incur those costs?" Most of the talk is that the company is concerned about getting hurt  by the chilly relationship between the two superpowers. It wants to hedge against the possibility of Chinese-based firms being kicked off of American exchanges.

But there is another side to the mutual hostility. China may well move toward “decoupling” its own technology industry from that of the United States, and the Hong Kong listing for Xpeng may have hedged some regulatory risks only by incurring others.

Two Bloomberg Intelligence analysts wrote recently, “China’s regulatory probe of Didi Chuxing may put tech-savvy automakers on alert that their gathering and analytics of vehicle operating data, which could become their next big source of profits, will fall under stricter government oversight.”

Didi is an Internet-based ride-hailing company, often considered China’s Uber. Didi’s shares, which trade on the NYSE, lost 20% of their value Tuesday after the PRC announced that it was banning Didi from app stores in China. Hedge fund manager Kyle Bass, often a critic of China, commented on CNN that that move wass “basically a big F U to the United States.”

Xpeng’s strategy, which includes primary listing on both sides of the Pacific, involves assuring both national governments that it will not constitute a technology leak. Brian Gu Hongdi, vice chairman and president of Xpeng, spoke to this as a press conference Wednesday, saying: “Xpeng will always obey the data requirements of data security and national security. Adapting to supervision is a must for science and technology enterprises.”