Nio grows with $1.9 billion injection from parent investors

(Bloomberg) — Nio Inc. jumped the most in nearly five months on Monday after it disclosed a 13.3 billion yuan ($1.9 billion) cash injection from existing shareholders.

Bloomberg’s most read

The Singapore-listed shares of the loss-making Chinese electric vehicle maker have gained nearly 16% on the financial consolidation of its China unit through a combination of its own cash and funds from strategic investors.

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 definitive agreements to invest 3.3 billion yuan in cash for newly issued shares of Nio Holding Co., also known as Nio China, according to a company statement on Sunday.

Nio Inc. will directly invest an additional 10 billion yuan in cash in new shares of the unit. The all-party transactions will reduce the parent’s stake to 88.3%, down from 92.1%. Strategic investors – along with other interested parties – will own the remaining 11.7 percent, the company said.

“We believe this new investment will resolve the company’s fundraising debate and improve near-term cash flow,” Morgan Stanley said in a research note on Sunday. “The investment from Nio China’s existing shareholders should further improve Nio’s balance sheet.”

While China has invested heavily in electric vehicles, intense domestic competition and overseas tariffs have clouded the sector’s outlook. Nio has sought to gain a competitive edge with its charging network and R&D spending on battery-swapping technology and even in non-auto areas such as semiconductors.

The cash injections will be made in two installments and will be completed by the end of the year, its 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 terms.

As the cash burn sparked analysts’ concerns, the company, which has never been profitable, reported a loss of 4.5 billion yuan for the second quarter. But its quarterly sales rose to 17.5 billion yuan, defying weakening demand and slightly higher than analysts expected.

Hefei Jianheng and Anhui Provincial Emerging Industry Investment are affiliated with the Anhui Provincial Municipal Government. Investors in the region are familiar with Nio, which closed a deal for a $1 billion investment in 2020, which at the time eased fears that the company was running out of cash.

The story continues

In December, Nio struck a deal to receive $2.2 billion from Abu Dhabi-backed CYVN Holdings LLC.

(Updates with the quota move from the first paragraph.)

Bloomberg Businessweek’s most read

©2024 Bloomberg LP