NIO’s shares tumble as US$2 billion top-up fundraising in New York signals delay in Hong Kong secondary stock sale

NIO plans to sell up to US$2 billion of American depositary shares in a top-up offering, the biggest sale by a Chinese company since Didi sale in June
Shares of the electric carmaker dropped by as much as 6.3 per cent in New York

Nio

Bloomberg

Published: 10:15am, 9 Sep, 2021

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NIO retreated the most in nearly three weeks after unveiling the biggest US fundraising plan by a Chinese firm since Didi Global.

Shares in the electric carmaker dropped as much as 6.3 per cent Wednesday after it announced plans to sell up to US$2 billion of American depositary shares, which would boost its cash holdings amid supply-chain disruptions and ahead of its planned Hong Kong listing. The company’s plan for an at-the-market offering adds to a banner year for such deals. Unlike traditional stock offerings that cater to institutional investors in one large transaction, these plans let companies sell shares in the open market over time.

If completed, NIO’s deal would be the biggest US equity offering by a Chinese firm since Didi’s now-infamous initial public offering in June. US stock sales by companies based in China have dwindled since the ride-hailing company’s debut sparked a regulatory crackdown that weighed on investor sentiment. That sent the Nasdaq Golden Dragon China Index down by over 30 per cent between July 6 and its low on August 19.

NIO’s US plan follows a different approach to fundraising by its rivals. Peer Li Auto raised US$1.5 billion as part of a Hong Kong listing last month, while XPeng did the same in June.

People familiar with the matter told Bloomberg in March that NIO was also considering listing on a second exchange, but this week’s offering could signal a lack of progress.

“We think this could reflect further delays in the Hong Kong listing process,” Deutsche Bank analyst Edison Yu wrote in a note.

NIO did not immediately respond to a request for comment.

Widely seen as the closest competitor to Tesla in China, NIO is one of the most prominent electric-vehicle makers in the country and is well placed to benefit from government policies that aim to encourage rapid consumer adoption of electric cars.

While the global semiconductor shortage has spared no carmaker around the globe, NIO has been the most vocal among EV makers about its struggles with the lack of supply. Just last week, the company lowered its delivery outlook for the third quarter, citing the continued uncertainty and volatility of chip supply.

According to Bloomberg Intelligence analyst Francis Chan, these troubles may not dissipate any time soon, as Chinese ports, which are key bottlenecks, are still at risk of being shut due to Covid outbreaks.

Proceeds from any sales under the new plan can help NIO pay down debt and lower its interest expense by about 90 per cent, Bloomberg Intelligence analyst Steve Man said in an interview, freeing up money to invest in priorities like research and its distribution network.

Man does not see the offering signalling any trouble for the EV company’s Hong Kong plans.

“The Hong Kong IPO is less about money-raising, but more about listing in Greater China,” he said.

This article appeared in the South China Morning Post print edition as: Nio shares fall as top-up fundraising in US signals delay in secondary listing

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