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Shares of Nio plummeted after the Chinese electric vehicle startup raised $1 billion through a second discounted share offering this year, aiming to capitalize on recent market strength to accelerate the development of advanced smart car technologies and bolster operations amid ongoing losses.
Closing at $5.72, Nio’s stock in New York fell by 8.9 percent yesterday. Its shares listed in Hong Kong also declined, dropping 0.4 percent to HKD46.54 (approximately USD5.97) by 11:10 a.m. today, after opening down 3.6 percent. From July 9 through September 9, the shares surged over 70 percent on both markets.
The company issued just over 181.8 million Class A ordinary shares at a price of $5.57 per American depositary share (ADS) or HKD43.36 per ordinary share, according to an announcement yesterday. This priced the offering at an 11.3 percent discount to its September 9 closing price of $6.28 in New York.
It’s common for shares to decline after a share offering, as issuing additional shares dilutes existing shareholders’ equity, often leading to a temporary decline in stock value and a sell-off.
The proceeds will fund research and development of core technologies for smart electric vehicles, develop future platforms and models across Nio’s brands, expand the battery swapping and charging network, and strengthen the firm’s financial position.
The company named Morgan Stanley Asia, UBS Securities, UBS Hong Kong, and Deutsche Bank as lead underwriters. They hold the option to purchase up to an additional 27.3 million ADS over the next 30 days.
Earlier in March, Nio raised HKD4 billion (about USD514.4 million) through a discounted share placement involving 136.8 million Class A ordinary shares priced at HKD29.46 each. Following that offering, the stock dropped sharply, hitting a low of USD3.02 in New York and HKD23.70 in Hong Kong.
Since its founding in 2014, Nio has yet to turn a profit. Its net loss narrowed slightly by 1 percent to CNY5 billion (approximately USD697.2 million) in the quarter ending June 30, compared to the previous year, even as revenue increased by 9 percent to CNY19 billion (about USD2.7 billion). Delivery numbers surged 26 percent to 72,056 vehicles.
Nevertheless, Nio maintains an optimistic outlook for the upcoming quarter, driven by the strong performance of the all-new ES8, a six- to seven-seat luxury SUV, and the more affordable L90, launched under its ONVO sub-brand.
“The positive market reception of the Onvo L90 and the new ES8 has strengthened our overall sales momentum,” said the company’s founder, chairman, and CEO.
“Fueled by this demand, we expect third-quarter total deliveries to be between 87,000 and 91,000 units, reflecting a year-over-year growth of 40.7 percent to 47.1 percent and setting a new record for the company,” he added.
For this quarter, Nio anticipates revenue to increase between 17 percent and 23 percent, reaching between CNY21.8 billion and CNY22.9 billion compared to the previous year. The company also aims to achieve its first profit on a non-GAAP basis in the fourth quarter.
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