Why Nio Jumped Again Today

What happened

Nio (NYSE:NIO) investors got some good news from Chinese authorities for the second day in a row today. The company's American depositary shares are responding again this morning, jumping 6% at the market open but easing to a gain of 1.9% as of 10:05 a.m. ET.

Image source: Nio.

So what

Shares of the Chinese EV company spiked yesterday on news that the Chinese government was adding a new stimulus package to jump-start a sagging economy. That could help drive more demand for Nio's vehicles. U.S. investors, however, have also had to consider the potential for Nio shares to be delisted along with other Chinese companies that don't satisfy U.S. regulators with sufficient auditing practices. Today, authorities in both countries announced an agreement on that matter, reports Reuters.

Now what

An initial audit agreement has been signed by authorities in Washington and Beijing to avoid delistings, according to the report. The agreement between the Public Company Accounting Oversight Board (PCAOB) and Chinese regulators is good news for Nio and more than 160 other Chinese companies that have been identified as facing delisting for non-compliance.

The PCAOB should gain the access to audit information it seeks from the agreement. However, investors will still need to monitor enforcement of the agreement. If it works in practice as intended, it should take delisting off the table for any of the identified Chinese companies that have sufficient auditing oversight.

Separately, Nio said it plans to begin shipping its first ET5 mid-size sedans on Sept. 30. Nio co-founder and president Qin Lihong made the statement at a Chinese auto show, reports CnEVPost. Qin also said he expects the ET5 to gain more sales than the gasoline-powered BMW 3 Series in China within just a year.

The sales and popularity of the sedan and Nio's other vehicles will determine how the business grows in the years to come. But for U.S. investors, it was equally important to find out today that delisting fears could finally be in the rearview mirror.

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Howard Smith has positions in Nio Inc. The Motley Fool has positions in and recommends Nio Inc. The Motley Fool has a disclosure policy.