Xpeng’s Stock Disappointing on First Day of HKEX: Trading Flat Amid Regulatory Worries (UPDATE)

Last Updated on July 7, 2021

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Xpeng’s stock, newly listed on the Hong Kong Exchange (HKEX) on July 7, ended the day flat. Its IPO price was HK$165, ($21.20) and that was again its price after its first trading day, a day that began with a modest upward move, then a fall to $160.20 by 10:30. It spent the rest of the day getting back to flat. 

Xpeng, an electric vehicle manufacturer, was founded in 2014 by Henry Xia (Xia Heng) and He Tao, who were both former senior executives of GAC Group, a giant auto concern that produces many foreign-branded products in China for sale, and He Xiaopeng, of Alibaba, whose name inspired that of the company, and who is now chairman and CEO.

Alibaba itself was also an early backer, as were Foxconn and IDG Capital.

Xpeng’s Pedigree and Positives

With such a pedigree, it is unsurprising that great hopes (along with the monies) have been invested in Xpeng as the PRC’s answer to Tesla. And in some respects, Xpeng has proven itself up to the demands of such a rivalry, undercutting Tesla on pricing in the Chinese market. It delivered 6,565 vehicles last month. That is an increase over June 2020 of 617%, and a monthly record.

This spring, Xpeng introduced a new model, the P5 sedan, with self-driving features, said to be an answer to a range of rivals: Li Auto and Nio as well as Tesla.

At the start of this year, there was some uncertainty hanging over Xpeng over pending litigation. A former Tesla employee, Cao Guangzhi, went to work for Xpeng in 2019, and Tesla filed a lawsuit in a California court alleging that Cao copied source code for autopilot technology before changing corporate ships.

Xpeng IPO Date and Details
In the world automotive markets, Xpeng is a formidable Tesla rival. Photo credit: Shutterstock.com

But that litigation has been settled.

So Why the Flat First Day Stock Performance?

With such positives, why did Xpeng not pop out of the IPO gate more impressively? There are a number of difficulties faced by the EV market in general: supply chain shortages, caused in large part by the logistic nightmares stimulated by a pandemic, are among them.

There is also the fear that a company like Xpeng, which has operations in both China and the United States, may be hurt by the chilly relationship between the two superpowers. That is one of the reasons Xpeng listed on (HKEX) in addition to its NYSE listing last August. It wanted 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.

The Savvy Are on Alert

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.”