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Shares of Nio (NYSE:NIO) plunge lower after it was announced that Chinese President Xi Jinping had secured a third term. As a result, NIO stock investors worry that Xi will continue his reign of strict economic controls and crackdowns on tech companies, as well as strict restrictions on the coronavirus shutdown. Shares of the electric vehicle (EV) company hit a new 52-week low at $8.38 in response, but have since recovered higher.
Diana Choyleva of Enodo Economics explained:
“Investors are now repositioning themselves for a China where Xi Jinping reigns supreme in an echo chamber of sycophants. For him, ideology and national security trump all other considerations, including growth.”
Other experts predict that tensions between the US and China will increase. Trade relations between the two world powers could deteriorate further as Jinping enters his third term.
It is worth noting that Nio is still on the Holding Foreign Companies Account Act (HFCAA) list, along with competitors such as XPeng (NYSE:XPEV) and Li Auto (NASDAQ:LI). These companies could be at risk of being delisted from US stock exchanges if US regulators do not receive corporate audits for three consecutive years.
The earliest of these companies to be scrapped due to the HFCAA is 2024. Nio has already taken precautions. Last May, the company announced that it was listed on the Singapore Exchange.
Despite the risks, many institutions still hold shares in NIO. Let’s get into the details.
5 Investors Still Betting Big on NIO Shares
Tracking institutional ownership is important as these large investors provide liquidity and support for stocks. During the second quarter, 516 funds reported owning NIO, an increase of 11 funds from the previous quarter. Meanwhile, the institutional put/call ratio stands at 1.29, up from 1.41 in the first quarter. That equates to 41.51 calls and 53.64 million puts, implying a bearish option position. With that in mind, let’s take a look at the company’s major shareholders.
Originalwish, CEO William Li’s investment vehicle: 177.47 million shares. The commitment of Originalwish is correct from the first quarter. Tencent Holdings (OTCMKTS:TCEHY): 164.25 million shares. Tencent’s stake is correct as of the first quarter of 2021. Baillie Gifford: 96.73 million shares. Baillie bought 7.98 million shares in the second quarter. BlackRock (NYSE:BLK): 61.34 million shares. BlackRock sold 3.24 million shares in the second quarter. Vanguard: 50.26 million shares. Vanguard bought 1.2 million shares during the second quarter.
At the date of publication, Eddie Pan had no (direct or indirect) positions in the securities referred to in this article. The views expressed in this article are those of the author, subject to InvestorPlace.com’s publishing guidelines.
Eddie Pan specializes in institutional investments and insider activities. He writes for InvestorPlace’s Today’s Market team, which focuses on the latest news on popular stocks.