(Bloomberg) — Nio Inc. made its biggest jump in nearly five months on Monday after announcing a cash injection worth 13.3 billion yuan ($1.9 billion) from existing shareholders.
Most read from Bloomberg
The Singapore-listed shares of the loss-making Chinese electric vehicle maker rose almost 16% on the financial strengthening of its Chinese unit through a mix of its own money and strategic investor funds.
A group of strategic investors – including Hefei Jianheng New Energy Automobile Investment Fund Partnership, Anhui Provincial Emerging Industry Investment Co. and CS Capital Co. – has entered into definitive agreements to invest 3.3 billion yuan in cash in newly issued shares of Nio Holding Co. also known as Nio China, according to a company statement Sunday.
Nio Inc. will immediately invest another 10 billion yuan of cash in new shares of the unit. The transactions by all parties will reduce the parent company’s stake to an 88.3% stake, down from 92.1%. The strategic investors – together with other stakeholders – will own the remaining 11.7%, the company said.
“We believe this new investment will resolve the company’s fundraising debate and improve cash flow in the near term,” Morgan Stanley said in a research note on Sunday. “The investment from existing Nio China shareholders should further strengthen Nio’s balance sheet.”
Although China has invested heavily in electric vehicles, intense domestic competition and foreign tariffs have clouded the sector’s prospects. Nio has been trying to gain a competitive advantage with its charging network and R&D spending in battery swapping technology and even in non-automatic areas like semiconductors.
The cash injections will take place in two installments and be completed by the end of the year, the statement said.
Nio Inc. will have the right to invest another 20 billion yuan to subscribe for more shares in Nio China by the end of next year, based on the same price and conditions.
As cash burn raised concerns among analysts, the company, which has never been profitable, reported a 4.5 billion yuan loss for the second quarter. But quarterly sales rose to 17.5 billion yuan, defying weakening demand and coming in slightly higher than analysts expected.
Hefei Jianheng and Anhui Provincial Emerging Industry Investment are affiliated with the municipal government of Anhui Province. The region’s investors are familiar with Nio, having struck a deal for a $1 billion investment in 2020, which allayed concerns at the time that the company was running out of cash.
In December, Nio also struck a deal to receive $2.2 billion from Abu Dhabi-backed CYVN Holdings LLC.
(Updates with stock move from first paragraph.)
Most read from Bloomberg Businessweek
©2024 BloombergLP
