Struggling Chinese electric carmaker Nio seeks US$344 million through sale of new American depositary shares
- The New York-listed electric vehicle maker will offer 60 million new shares, as coronavirus and increased competition heighten fundraising needs
- Fundraising comes just two months after new strategic investors agreed to inject 7 billion yuan of cash into the business
Cash-strapped Chinese electric car maker Nio said it expects to raise up to US$344.2 million from a new share sale of 60 million American depositary receipts (ADRs).
This would be its first offering of shares since it listed in New York in September 2018.
Nio said in a prospectus that the estimate was based on its last closing price on June 8, at US$5.97.
The loss-making company, founded in 2014, said it would use the proceeds to fund research and development, expand its manufacturing base, and develop its sales and servicing network.
There is an overallotment option for the underwriters to buy nine million more ADRs within a 30-day period if the share sale raises strong demand from investors.
Credit Suisse, Morgan Stanley and CICC are the joint bookrunners for the deal. The final pricing for the ADRs will be determined after the New York stock market closes on Wednesday. Nio’s stock reached a 12-month high of US$6.68 on Tuesday. The 60 million shares work out to about 7 per cent of its existing share capital.
The new investors, which include Hefei City Construction and Investment Holding, CMG-SDIC Capital and Anhui Provincial Emerging Industry Investment, together will hold a 24.1 per cent stake in the new company, reducing Shanghai-based Nio’s stake to 75.9 per cent.
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Back then, founder and chief executive William Li Bin said the cash-strapped company would have sufficient funds to support its business development after the cash injection. Nio had said it expected the deal to be closed by the second quarter.
In the latest prospectus filed this week, Nio disclosed that the first 3.5 billion yuan instalment from these new investors will come by the end of June at the earliest.
“Our business and financial performance have been adversely affected by the outbreak of Covid-19 since the beginning of 2020, and this is likely to continue throughout the current year, if not longer,” it said in the prospectus.
Tencent, a 12.6 per cent shareholder, has also committed to sign up for an equivalent of US$10 million worth of the ADRs at the offer price, according to the prospectus. Its stake would be slightly diluted to 12 per cent, assuming the underwriters do not exercise the overallotment option.
For the three months ended March this year, Nio’s net loss was 1.72 billion yuan, 35 per cent narrower than the 2.65 billion yuan loss it saw in the same period a year earlier. For the whole of 2019 its net losses totalled 11.41 billion yuan.
The outlook for the second quarter could improve further, according to Bloomberg Intelligence analysts.
“Nio’s operating loss could level off in the second quarter as gross margin may turn positive, mainly by significant battery and manufacturing cost reductions as it ramps up production,” analysts Steve Man and Kevin Kim wrote in a note. They said Nio’s efforts to lift output volume to 4,500-5,000 units a month by around August implies its sport utility vehicles are gaining in popularity.
Nio’s shares have risen 66.2 per cent so far this year.
